Source: https://www.sec.gov/news/speech/speecharchive/1998/spch221.htm
Timestamp: 2019-04-26 01:52:00+00:00

Document:
"Insider trading" is a term subject to many definitions and connotations and it encompasses both legal and prohibited activity. Insider trading takes place legally every day, when corporate insiders  officers, directors or employees  buy or sell stock in their own companies within the confines of company policy and the regulations governing this trading.
The type of insider trading we discuss here is the illegal variety that most of us think of when we hear the term; the type of insider trading that achieved wide-spread notoriety in the 1980s with the SEC's civil cases and the United States Department of Justice's criminal cases against Michael Milken and Ivan Boesky and which inspired even Hollywood's imagination with the movie "Wall Street". It is the trading that takes place when those privileged with confidential information about important events use the special advantage of that knowledge to reap profits or avoid losses on the stock market, to the detriment of the source of the information and to the typical investors who buy or sell their stock without the advantage of "inside" information.
The American notion that insider trading is wrong was well-established long before the passage of the federal securities laws. In 1909, the United States Supreme Court held that a director of a corporation who knew that the value of the stock of his company was about to skyrocket committed fraud when he bought company stock from an outsider without disclosing what he knew.7 But this condemnation is not universal, even in the United States.
Those who oppose prohibiting insider trading advance many arguments, most of which fall on their own weight.
Some argue that insider trading is a legitimate form of compensation for corporate employees, permitting lower salaries that, in turn, benefits shareholders. It provides an incentive to innovation, some argue, by promising huge rewards for developing a plan or product that will lead to a precipitous rise in the stock.8 This argument, however, fails to address the real and significant hazard of creating an incentive for corporate insiders to enter into risky or ill-advised ventures for short term personal gain, as well as to put off the public release of important corporate information so that they can capture the economic fruits at the expense of shareholders.
We recognize the important role that analysts play in our markets and seek to encourage legitimate research.15 Nevertheless, the Commission is concerned about selective corporate disclosure of material information to favored analysts prior to public disclosure and the resulting threat to market fairness when the favored few get to trade prior to public disclosure. Currently, this is an area of special concern to the Commission because we have seen several cases of unusual trading in the interval between a company's disclosure of price sensitive information to analysts and disclosure of the information to the public. Chairman Levitt made the Commission's position clear: "Legally, you can split hairs all you want. But, ethically, its very clear: If analysts or their firms are trading  knowing this information, and prior to public release  it's just as wrong as if corporate insiders did it."16 The Commission will be looking very closely at these cases as they arise.
Indeed, the European Economic Community has formally recognized the importance of insider trading prohibitions by passing a directive requiring its members to adopt insider trading legislation. The preamble to the directive stresses the economic importance of a healthy securities market, recognizes that maintaining healthy markets requires investor confidence and acknowledges that investor confidence depends on the "assurance afforded to investors that they are placed on an equal footing and that they will be protected against the improper use of inside information."20 These precepts echo around the world as reports of increased insider trading regulation and enforcement efforts are daily news.
Rooted in the common law tradition of England, on which our legal system is based, we have relied largely on our courts to develop the law prohibiting insider trading. While Congress gave us the mandate to protect investors and keep our markets free from fraud, it has been our jurists, albeit at the urging of the Commission and the United States Department of Justice, who have played the largest role in defining the law of insider trading.
After the United States stock market crash of 1929, Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934, aimed at controlling the abuses believed to have contributed to the crash. The 1934 Act addressed insider trading directly through Section 16(b) and indirectly through Section 10(b).
Section 16(b) prohibits short-swing profits (profits realized in any period less than six months) by corporate insiders in their own corporation's stock, except in very limited circumstance. It applies only to directors or officers of the corporation and those holding greater than 10% of the stock and is designed to prevent insider trading by those most likely to be privy to important corporate information.
These broad anti-fraud provisions, make it unlawful to engage in fraud or misrepresentation in connection with the purchase or sale of a security.22 While they do not speak expressly to insider trading, here is where the courts have exercised the authority that has led to the most important developments in insider trading law in the United States.
The breadth of the anti-fraud provisions leaves much room for interpretation and the flexibility to meet new schemes and contrivances head on. Moral imperatives have driven the development of insider trading law in the United States. And the development of insider trading law has not progressed with logical precision as the reach of the anti-fraud provisions to cover insider trading has expanded and contracted over time.
Based on this reasoning, the Commission held that a broker who traded while in possession of nonpublic information he received from a company director violated Rule 10b-5. The Commission adopted the "disclose or abstain rule": insiders, and those who would come to be known as "temporary" or "constructive" insiders, who possess material nonpublic information, must disclose it before trading or abstain from trading until the information is publicly disseminated.
Several years later in the case of SEC v. Texas Gulf Sulphur Co., a federal circuit court supported the Commission's ruling in Cady, stating that anyone in possession of inside information is required either to disclose the information publicly or refrain from trading.25 The court expressed the view that no one should be allowed to trade with the benefit of inside information because it operates as a fraud all other buyers and sellers in the market.26 This was the broadest formulation of prohibited insider trading.
The 1980s were an extraordinary time in this country's economic history, marked by a frenzy of corporate takeovers and mergers involving what then were dazzling amounts of money. Insider trading reached new heights. Ironically, it is during this period that courts narrowed the scope of Section 10(b) and Rule 10b-5 in the insider trading context.
In the 1980 case of Chiarella v. United States, the United States Supreme Court reversed the criminal conviction of a financial printer who gleaned nonpublic information regarding tender offers and a merger from documents he was hired to print and bought stock in the target of the companies that hired him.27 The case was tried on the theory that the printer defrauded the persons who sold stock in the target to him. In reversing the conviction, the Supreme Court held that trading on material nonpublic information in itself was not enough to trigger liability under the anti-fraud provisions and because the printer owed target shareholders no duty, he did not defraud them. In what would prove to be a prophetic dissent, Chief Justice Burger opined that he would have upheld the conviction on the grounds that the defendant had "misappropriated" confidential information obtained from his employer and wrongfully used it for personal gain.
In response to the Chiarella decision, the Securities and Exchange Commission promulgated Rule 14e-3 under Section 14(e) of the Exchange Act, and made it illegal for anyone to trade on the basis of material nonpublic information regarding tender offers if they knew the information emanated from an insider.28 The purpose of the rule was to remove the Chiarella duty requirement in the tender offer context  where insider trading was most attractive and especially disruptive.
In 1981, the Second Circuit adopted the "misappropriation" theory, holding in the case of United States v. Newman29 that a person with no fiduciary relationship to an issuer nonetheless may be liable under Rule 10b-5 for trading in the securities of an issuer while in possession of information obtained in violation of a relationship of trust and confidence. Newman, a securities trader, traded based on material nonpublic information about corporate takeovers that he obtained from two investment bankers, who had misappropriated the information from their employers.
Three years later in Dirks v. SEC,30 the Supreme Court reversed the SEC's censure of a securities analyst who told his clients about the alleged fraud of an issuer he had learned from the inside before he made the facts public. Dirks was significant because it addressed the issue of trading liability of "tippees": those who receive information from the insider tipper. Dirks held that tippees are liable if they knew or had reason to believe that the tipper had breached a fiduciary duty in disclosing the confidential information and the tipper received a direct or indirect personal benefit from the disclosure. Because the original tipper in Dirks disclosed the information for the purpose of exposing a fraud and not for personal gain, his tippee escaped liability.
A significant aspect of the decision was contained in a footnote to the opinion, which has come to be known as "Dirks footnote 14." There, Justice Powell formulated the concept of the "constructive insiders"  outside lawyers, consultants, investment bankers or others  who legitimately receive confidential information from a corporation in the course of providing services to the corporation. These constructive insiders acquire the fiduciary duties of the true insider, provided the corporation expected the constructive insider to keep the information confidential.
Last year, in a landmark victory for the SEC, the Supreme Court reversed one of these decisions and explicitly adopted the misappropriation theory of insider trading in the case of United States v. O'Hagan.39 O'Hagan was a partner in a law firm retained to represent a corporation, Grand Met, in a potential tender offer for the common stock of the Pillsbury Company. When O'Hagan learned of the potential deal, he began acquiring options in Pillsbury stock, which he sold after the tender offer for a profit of over $4 million. O'Hagan argued, essentially, that because neither he nor his firm owed any fiduciary duty to Pillsbury, he did not commit fraud by purchasing Pillsbury stock on the basis of material, nonpublic information.
Although the law of insider trading in the United States is continuing to evolve, the decision in O'Hagan is a significant milestone in defining the scope of Rule 10b-5 insider trading prohibitions.
Much has and can be said about how the Directive compares to the United States law on insider trading. A fundamental difference between the EC Directive and the United States' prohibition against insider trading under Section 10b and Rule 10b-5 as developed by the courts, is that the Directive does not require that the insider trader breach a fiduciary duty to the source of the information for liability to attach. In this respect, it mirrors the United States' prohibition against trading on the basis of nonpublic information about a tender offer under Section 14(e) of the Securities Exchange Act of 1934 and the Commission's Rule 14e-3. As noted, the Supreme Court recently upheld this rule in the O'Hagan case.
Although it may be too early to draw conclusions about the efficacy of the EC Directive generally, one aspect bears discussion as we look to the future of insider trading regulation. The Directive leaves it to the discretion of its members to provide appropriate penalties for violations of insider laws, with the proviso that the "penalties shall be sufficient to promote compliance with these measures."53 A rational assumption is that making insider trading a criminal offense, carrying the threat of imprisonment, provides the greatest deterrent to commission of the offense.
On one level, this is certainly true. Providing stiff criminal penalties for insider trading sends a message to the community that the government considers insider trading to be a serious offense, contrary to attitudes prevailing quite recently in many markets outside the U.S. But if the law does not lead to successful prosecutions, its power as a deterrent is soon diminished.
The experience in the Netherlands is noteworthy. In May of this year, Dutch authorities heralded its new law against insider trading as the "toughest in the world."54 The statute provides for criminal penalties only.
Insider trading is an extraordinarily difficult crime to prove. The underlying act of buying or selling securities is, of course, perfectly legal activity. It is only what is in the mind of the trader that can make this legal activity a prohibited act of insider trading.
Direct evidence of insider trading is rare. There are no smoking guns or physical evidence that can be scientifically linked to a perpetrator. Unless the insider trader confesses his knowledge in some admissible form, evidence is almost entirely circumstantial. The investigation of the case and the proof presented to the fact-finder is a matter of putting together pieces of a puzzle. It requires examining inherently innocuous events  meetings in restaurants (as in the Dutch case), telephone calls, relationships between people, trading patterns  and drawing reasonable inferences based on their timing and surrounding circumstances to lead to the conclusion that the defendant bought or sold stock with the benefit of inside information wrongfully obtained.
In the United States, insider trading is a crime, punishable by monetary penalties and imprisonment. But it is also a civil offense. The importance of making insider trading both a criminal and civil offense is illustrated by two recent decisions by U.S. federal courts.
In September 1998, the Ninth Circuit Court of Appeals held in the case of United States v. Smith61 that in a criminal insider trading case, the government must prove that even a defendant who is a traditional insider (rather than a misappropriator) actually used material nonpublic information in making the decision to trade, rejecting the SEC's position and the position of the Second Circuit expressed in an earlier decision62 that it is enough for the government to show that the defendant was in possession of the information at the time he traded. Several months ago, the Eleventh Circuit Court of Appeals reached the same decision in SEC v. Adler, a civil case, but to alleviate the difficulties of proof raised by the standard, adopted a rule providing that although "use" is a required element of a Rule 10b-5 insider trading violation, when an insider trades in possession of material nonpublic information, a strong inference arises that such information was used by the insider in trading.63 The burden then shifts to the trader to rebut the inference by adducing evidence that there was no causal connection between the knowledge and the trade. Such an inference is unavailable in the criminal context, where the burden remains on the government to prove each element of an offense beyond a reasonable doubt. These two cases demonstrate the importance of having both civil and criminal prosecution available to the regulator.
In the United States, civil enforcement by the SEC has proved to be an extremely powerful tool against insider trading. The SEC has broad authority to investigate possible violations of the federal securities laws, including insider trading. In its informal investigations, which the staff can conduct without Commission authorization, the staff requests information on a voluntary basis. In its formal investigations, the staff can use the Commission's subpoena power to compel witnesses to testify or to produce books, records, and other evidence.
The federal court injunction, an order that prohibits future violations of the law, has historically been one of the Commission's principal enforcement tools. Conduct that violates the injunction may result in fines or imprisonment. In actions seeking injunctions, the Commission also may request temporary restraining orders and preliminary injunctions as emergency relief to address ongoing violations. In its emergency actions, the Commission will often request freeze orders to prevent profits from alleged insider trading from disappearing pending the investigation and enforcement effort. As additional sanctions in civil actions, the Commission frequently seeks orders requiring disgorgement of illegal profits and the payment of civil penalties.
Under new proposals recently announced, enforcement powers will be centralized in U.K.'s Financial Services Administration, which would have far reaching new powers to crack down on insider trading, including the power to impose unlimited civil fines for insider trading. The FSA, modeling itself on the SEC, will have subpoena power, the power to punish noncooperation and to order wrongdoers to make restitution.71 Hopefully, the U.K. will serve as a model to other countries who are struggling to find ways to effectively deal with insider trading. As the U.S. example has demonstrated, and the U.K. recently recognized, strong civil enforcement powers are an important weapon in the regulator's arsenal.
Insider trading often crosses borders: a foreign national engages in insider trading in the domestic market; nationals effect insider trading through foreign accounts or important evidence of domestic insider trading lies outside domestic borders.
Successful investigations and prosecutions of these cases require international cooperation. Perhaps one the most progressive aspects of the EC Directive is that it requires members to cooperate with each other "whenever necessary for the purpose of carrying out their duties" in connection with the EC Directive. The significant benefit of this provision is that it requires no further agreements between or among states regarding cooperation.
The SEC has entered into 32 arrangements with foreign counterparts for information sharing and cooperation in the investigation and prosecution of securities law violations. These agreements have taken primarily two forms: Mutual Legal Assistance Treaties in Criminal Matters and Memoranda of Understanding.
The United States has entered into Mutual Legal Assistance Treaties have been entered into with a number of countries, including Switzerland, the United Kingdom and Northern Ireland, the Cayman Islands, the Netherlands, Turkey, Canada, the Bahamas and Italy. The treaties generally provide for assistance in criminal matters, including assistance in locating witnesses, obtaining statements and testimony of witnesses, production and authentication of business records and service of judicial and administrative documents. The major advantage of these treaties is that they are binding on the parties to the treaty.
The other form of agreement the United States has relied on in the international context is the Memorandum of Understanding. MOUs are non-binding statements of intent between regulators providing for the exchange of information and mutual cooperation. The Commission has entered into MOUs or similar agreements with Switzerland, Japan, the U.K., Brazil, the Canadian Provinces of Ontario, Quebec and British Columbia, Italy, the Netherlands, France, Mexico, Portugal and Germany. Experience has shown that MOUs provide an effective means of obtaining information in securities enforcement and assist in developing a framework for cooperation and improved communication.
Domestically, the United States has passed laws to facilitate its cooperation with foreign governments. The Insider Trading and Securities Fraud Enforcement Act of 1988 expanded the Commission's ability to provide assistance to foreign regulators by allowing it to use its compulsory powers to compel testimony and production of documents obtain information at the request of a foreign securities authority.
The International Securities Enforcement Cooperation Act of 1990 enlarged the Commission's ability to address international securities issues in several ways. It amended the securities laws to permit the Commission to institute an administrative proceeding barring, sanctioning, or otherwise placing conditions on a securities professional's ability to engage in Commission-regulated activities if a foreign court or securities authority has found that the professional engaged in illegal or improper conduct. The law also amended the securities laws to provide confidential treatment for records produced under reciprocal arrangement with foreign securities authorities by exempting the documents from the disclosure obligation of the Freedom of Information Act if a good faith representation is made that disclosure would violate that country's confidentiality requirements. In addition, the law makes explicit the Commission's rulemaking authority to provide access to nonpublic documents and other information to both foreign and domestic authorities. Finally, it authorizes the Commission to accept reimbursement from a foreign securities authority for expenses incurred by the Commission in providing assistance.
The Commission applied to the High Court of the Republic of Singapore under the Hague Convention for the appointment of an examiner to take evidence from witnesses in Singapore to be used in the proceeding in the Southern District of New York. The Singaporan defendants opposed the appointment of an examiner, arguing that despite the U.S. classification of the action as civil, violations of Section 10(b) and Rule 10b-5 are penal in nature and, therefore, the Hague Convention does not apply. The Singapore court held for the SEC, finding that an action for an injunction under Section 10(b) and Rule 10b-5 is a civil proceeding according to the law of the United States and the law of Singapore. This decision, if followed in other Hague signatory countries, opens yet another mode of international information-gathering available to the SEC's enforcement program.
1 The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for private publication or statement by any of its employees. The views expressed herein are those of the authors and do not necessarily reflect the views of the Commission or of the authors' colleagues on the staff of the Commission.
2 Testimony of Arthur Levitt Concerning Appropriation for Fiscal Year 1999 Before the Subcommittee on Commerce, Justice, State and Judiciary of the Senate Committee Appropriations, March 19, 1998.
3 Arthur Levitt, A Question of Investor Integrity: Promoting Investor Confidence by Fighting Insider Trading, Address Before the "SEC Speaks" Conference, February 27, 1998.
5 Annual Report of the Securities and Exchange Commission to the United States Congress for Fiscal Year 1997.
6 Oliver August, Insider Dealing Returns Thanks to Merger Mania, The Times, August 17, 1998, Business Section.
7 Strong v. Repide, 213 U.S. 419 (1909).
8 See, e.g., Henry B. Manne, Insider Trading and the Stock Market (1966) (insider trading increases market efficiency because it produces desirable incentives on corporate managers).
9 E.g., Charles Vaughn Baltic, III, The Next Step in Insider Trading Regulation: International Cooperative Efforts in the Global Securities Market, Law and Policy in International Business, Vol.23; No.1 at 167; Dennis J. Block and Jonathan M. Hoff, Renewed Interest in Defining Insider Trading, The New York Law Journal, June 14, 1990, at 5.
10 Herman & MacLean v. Huddleston, 459 U.S. 375 (1983).
11 See supra note 2.
12 Nanny Discovers Abusive Squeezes, The Daily Telegraph, June 30, 1998, at 27.
13 SEC v. Stevens, 91 Civ. 1869 (S.D.N.Y. March 19, 1991), Litig. Rel. No. 12813.
14 SEC v. Rosenberg, 91 Civ. 2403 (D.D.C. September 24, 1991), Litig. Rel. No. 12986.
15 When the U.S. Congress passed the Insider Trading and Securities Fraud Enforcement Act of 1988, which augmented the law through a variety of measures designed to provide greater deterrence, detection and punishment of violations of insider trading law, it noted in its report that it "recognizes that market analysts play a crucial role in facilitating the dissemination of information to the marketplace, thereby promoting smoothly functioning markets. The legislation is not intended to interfere with these critical functions." Insider Trading and Securities Fraud Enforcement Act of 1988, H.R. Rep. No. 910, 100th Cong., 2d Sess. 10 (1988) (reprinted in 1988 U.S. Code Cong. & Admin, News 6043, 6056).
16 See supra note 2.
17 See Manne, supra note 7; Bruce Fein, What's So Bad About Insider Trading?, The Legal Times, January 6, 1992, at 18; Henry N. Butler, Can the SEC Change?, Corporate Board, May 1989, Vol. 10, No. 56, at 6.
18 One of the authors regularly receives phone calls from angry options writers who may have written hundreds of out-of-the-money contracts on the stock of the target shortly before the public announcement of a tender offer. Several important insider trading cases began with such a call.
19 James A. Silkenat, Overview of U.S. Securities Markets and Foreign Issuers, 17 Fordham Int'l L.J. S4 (1994). Regarding Germany, a commentator notes, "What was long appreciated by locals as Frankfort's cosy, clubby atmosphere is now increasingly seen as unacceptable provincialism, and a serious hindrance to the city's bid to challenge London for the position as Europe's main financial centre." John Eisenhammer, Red Faces at Failure to Enact EC Law; The Hard Bargaining, High-Living Former Head of Germany's Biggest Union is a Fallen Hero After Insider Dealing Scandal, The Independent (London), May 30, 1998, at 13.
20 Council Directive 89/592 Coordinating Regulations on Insider Trading, 1 Common Mkt. Rep. (CCH) ¶ 1761.
21 17 C.F.R. § 240.10b-5.
22 Section 17(a) of the Securities Act of 1933 reaches similar fraud in the initial offering or sale of a security.
23 40 SEC 907 (1961).
25 401 F.2d 833 (2d Cir. 1968), cert. denied, 394 U.S. 976 (1969).
27 445 U.S. 222 (1980).
28 The Commission's authority to promulgate rules under Section 14(e) of the Exchange Act is confined to the tender offer context. It reads, in relevant part: "It shall be unlawful for any person . . . to engage in any fraudulent, deceptive or manipulative acts or practices, in connection with any tender offer . . . . The [SEC] shall . . . by rule or regulations define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive or manipulative." 15 U.S.C. §78n(e).
29 664 F.2d 12 (2d Cir. 1981), aff'd after remand, 722 F.2d 729 (2d Cir. 1983), cert. denied, 464 U.S. 863 (1983).
30 463 U.S. 646 (1983).
31 791 F.2d 1024 (2d Cir. 1986), aff'd 484 U.S. 19 (1987).
32 Echoing the Carpenter case, German prosecutors reportedly are considering bringing insider trading charges against a German television journalist, known as "Germany's first international stock market guru," for allegedly telling his friends which stock he was going to recommend on his weekly program. German TV Journalist is Accused of Insider Trading, AP Worldstream, August 17, 1998, financial pages.
33 791 F.2d at 1029.
34 484 U.S. 19, 24 (1987).
35 Diamond v. Oreamuno, 248 N.E. 2d 910, 912 (N.Y. 1969).
36 See, e.g., SEC v. Materia, 745 F.2d 197, 201 (2d Cir. 1984); Rothberg v. Rosenbloom, 771 F.2d 818 (3d Cir. 1985); SEC v. Cherif, 933 F.2d 403 (7th Cir. 1990); SEC v. Clark, 915 F.2d 439 (9th Cir. 1990).
37 United States v. Bryan, 58 F.3d 933, 944 (4th Cir. 1995); United States v. O'Hagan, 92 F.3d 612 (8th Cir. 1996).
38 United States v. O'Hagan, 117 S.Ct. 2199, 2211 (1997) (quoting the Eighth Circuit's opinion in O'Hagan, 92 F.3d at 618).
39 117 S. Ct. 2199 (1997).
40 The Court also rejected O'Hagan's argument that the Commission's Rule 14e-3, which prohibits trading in securities based on nonpublic information about a tender offer (see supra note 28 and accompanying text), is invalid because the Commission exceeded its statutory authority in promulgating it.
41 117 S. Ct. at 2207.
42 117 S. Ct. at 2210.
43 117 S. Ct. at 2208.
44 Council Directive 89/592 Coordinating Regulations on Insider Trading, 1 Common Mkt. Rep. (CCH) ¶ 1761 ("EC Directive").
45 See Warren, The Regulation of Insider Trading in the European Community, 48 Wash. & Lee L. Rev. 1037 (1991).
47 William Dawkins and Hugo Dixon, EEC Proposes Action on Insider Trading, The Financial times (London), April 29, 1987, at § I, 48.
48 EC Directive, supra note 44. Article 11 provides that the EC may enter into agreements with non-member countries on insider trading issues and Article 12 provides for a Contact Committee to deal with problems that may arise under the Directive.
49 Tim Dickson, Ensuring the 1992 Programme Isn't A Spivs' Charter; The European Market, Financial Times, June 19, 1989, § I, at 2.
50 Insider Trading Accord Creates Dual Definitions for Insider, Eurowatch, Financial Services, Vol. 9, No. 16, October 17, 1997.
51 Robert Graham, New Broom for Bourse: The Head of Italy's Stock Market Watchdog Outlines His Plans, Financial Times (London Edition), March 24, 1997, at 22.
52 Arthur Levitt, A Question of Investor Integrity: Promoting Investor Confidence by Fighting Insider Trading, Address Before the "SEC Speaks" Conference, February 27, 1998.
53 EC Directive, Art. 13.
54 Louden Clear, Financial Times (London), May 20, 1998, at 13.
55BolsWessanen Insider Trading Case Today, Suspects Allegedly Made 700,000 nfl, AFX News, June 2, 1998.
56BolsWessanen Insider Dealing Charges Dismissed, AFX News, July 17, 1998.
58BolsWessanen Case Fails, Financial Times (London), July 17, 1998, at 2. See also David McKay, Insider Trading Case Opened After Leak of Sad Document, Business Day (South Africa), September 14, 1998 at 1 ("There has never been a prosecution for insider trading in South Africa. Under present law insider trading is a criminal offense and the burden of proof is extremely onerous.").
59Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) (holding that Fifth Amendment "does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them."); SEC v. Colello, 139 F.3d 674 (9th Cir. 1998) (applying Baxter to SEC civil enforcement proceedings); SEC v. Graystone Nash, 25 F.3d 187 (3rd Cir. 1994) (same).
60Griffin v. California, 380 U.S. 609 (1965).
611998 U.S. App. LEXIS 20750.
62See United States v. Teicher, 987 F.2d 112, 119 (2d Cir. 1992), cert. denied, 114 S. Ct. 467 (1998).
64See SEC v. Downe, 969 F. Supp. 149, 159 (S.D.N.Y. 1997) (quoting H.R. Rep. No.98-355, at 7-8 (1983), reprinted in 1984 U.S.C.C.A.N. 2274, 2280-81).
66Clare Dobie, Alter Insider Trading Law, Says SIB Chief, The Independent (London), March 26, 1990, at 22.; Jane Martinson, Strong Regulator to Be a Balance by Independent Appeal System; Enforcement A "Consistent Approach" That is Designed to Provide a Level Playing Field, The Financial Times (London), July 31, 1998 at 8.
67Annual Report of the Securities and Exchange Commission to the United States Congress for Fiscal Year 1997.
68Bring It All Under One Roof: Personal View of Lord Alexander: There Are Too Many Organizations Involved in the Present System of Financial Regulation, The Financial Times (London), February 28, 1997, at 20.
69Wrong Track on Insider, The Financial Times (London), September 29, 1992, at 24.
70Clare Dobie, Alter Insider Trading Law, Says SIB Chief, The Independent (London), March 26, 1990, at 22.
71Jane Martinson, Powers Against Crime Will Reflect SEC's Sanctions, The Financial Times (London), July 31, 1998, at 11.
73The Hague Convention on the Taking of Evidence Abroad in [C]ivil or Commercial Matters, Mar. 18, 1970, 23 U.S.T. 2555.
74SEC v. One Unknown Purchaser of the Call Options of APL Limited and Ong Congqin Bobby, 97 Civ. 2664 (S.D.N.Y. April 15, 1997), Litig. Rel. No. 15334.
75Stewart Oldfield and Sauw Yim, Regulators Aim to Hit Market Regulation, South China Morning Post, July 22, 1998, at 1.
76Munir: Amendments to Promote Transparency, New Straits Times-Management Times, June 17, 1998.
77Indian Watchdog Makes Negotiated Deals More Transparent, Asia Pulse, August 13, 1998.
78Jonathan Birchall, Hanoi Decree on Exchange, Financial Times, July 15, 1998.
79Global Regulations: Financial Reforms in Germany, Egypt, Philippines, EIU ViewsWire, April 9, 1998.
80Netherlands Securities Board to Investigate Amsterdam Bourse Systems, AFX News, July 22, 1998.
81Arthur Levitt, A Question of Investor Integrity: Promoting Investor Confidence by Fighting Insider Trading, Address Before the "SEC Speaks" Conference, February 27, 1998.

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