Public Perceptions of Insider Trading

The U.S. insider trading enforcement regime has been mired in controversy since it was introduced in 1961. Some have argued that insider trading should not be regulated because it actually improves market performance. Others have argued that insider trading must be vigorously regulated because it is generally regarded as unfair and therefore undermines market confidence. Arguments on both sides of this debate, however, rest on empirical claims that are rarely backed by data. The resulting impasse has left lawmakers and jurists without a clear sense of what conduct should be proscribed and why. This, in turn, has placed market participants in a state of confusion that has been exaggerated by the fact that insider trading is a common-law offense, never having been defined by statute or rule. But after sixty years, Congress appears poised to act. With reform proposals pending, reliable empirical evidence of public attitudes concerning insider trading has never been more needed. This Article presents the results of the first large-scale national survey of public attitudes regarding insider trading since 1986, and the first comprehensive, census-representative study ever conducted on the subject. It offers valuable data to inform claims regarding public perceptions of, inter alia, the fairness of different forms of insider trading, its pervasiveness, and the public’s willingness to participate in markets where insider trading is common.