株式と外国為替取引のジャーナル
オープンアクセス

概要

The Calculation of Illicit Profit in US Insider Trading Cases

Ping-Yen Lai

In the US, there are currently three different approaches, the net profit, the notional profit/market absorption, and the event studies approach, taken by the circuit courts and district courts in calculating illicit profit in insider trading cases. Such non-uniform approach has created opportunities for defendants to argue for the approach that is best to their advantage, thereby reducing sentencing. This paper evaluates the three different approaches from their legal interpretation and justification, expected harshness and standard deviation on sentencing, as well as transaction cost. The net profit approach, which is favored by government agency, has many drawbacks as it suffers from inconsistency, harsh and uncertain expected sentence. A jurisdiction is better off if it decides between market absorption and event studies approach.