The Fiduciary Principle of Insider Trading Needs Revision


This article, by former Commissioner of the SEC, Co-Director of the Dennis J. Block Center for the Study of International Business, and Professor at Brooklyn Law School Roberta S. Karmel, argues that the misappropriation doctrine of insider trading law, introduced in Chiarella v. United States, is unsound. Karmel argues that the doctrine has been misapplied to cases where defendants did not steal information belonging to others and in cases where defendants based their trading on an independent investigation of facts. In addition, Karmel highlights the difficulty in distinguishing legitimate research by industry professionals and insider information. Further, Karmel finds that the fiduciary principle by which the Supreme Court has limited insider trading cases is inadequate in cases that involve trading in advance of tender offers, leaks of information, and hacked information. Karmel concludes by calling for a more refined statutory definition of insider trading that incorporate duties of confidentiality beyond fiduciary duty.


SEC, missapropriation, Winans, Dirks, 10(b), tippee, personal benefit, mandatory disclosure, nonpublic information, rapid disclosure, securities, research, Dorozhko, STOCK Act, Rule 14e-3, Williams Act, fiduciary principle, Insider Trading Proscriptions Act



Roberta S. Karmel (Professor of Law and Co-Director of the Dennis J. Block Center for the Study of International Business Law at Brooklyn Law School.)



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