Ferrara on Insider Trading and The Wall.

ALM Media, LLC, May 2013, Pages: 890

This valuable book discusses the evolution of the law of insider trading and explores ways in which corporations can use compliance programs to deter wrongdoing, with particular attention to multi-service financial institutions. Ferrara on Insider Trading and The Wall demonstrates how such firms can implement “Chinese Walls” and other procedural devices to prevent employees who acquire material nonpublic information from sharing it with employees who trade securities.

The authors analyze the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Sarbanes-Oxley Act and SEC regulations regarding selective disclosure and insider trading. They also discuss recent cases and other important developments such as Rule 10b5-1 trading plans and a heightened regulatory focus on hedge funds. In addition, the book provides suggested guidelines for deterring insider trading by employees.

PART ONE:
THE LAW OF INSIDER TRADING

CHAPTER 1
An Overview of Insider Trading
-1.01 Reasons for Prohibition
-1.02 Insider Trading—Sources of the Law
[1] The Federal Securities Laws
[2] Mail Fraud, Wire Fraud, and the New Crime of Securities Fraud
[3] RICO

CHAPTER 2
Government Actions
-2.01 Elements of a Rule 10b-5 Action
[1] Who Can Be Liable for Insider Trading?
[2] What Is Nonpublic Information?
[3] What Is Material Information
[4] Scienter: What Mental State Is Required?
[5] The “Possession vs. Use” Debate
[6] Types of Investment Instruments Subject to the Federal Prohibition
-2.02 The Historical Development of Liability for Insider Trading
[1] The Early Case Law
[2] The Parity-of-Information Theory
[3] Chiarella: The Supreme Court Endorses the “Classical Theory”
[4] Dirks: Tippees Liable Only When Tipper Breached a Duty to the Corporation's Shareholders and Sought a Personal Benefit
[5] Dirks: The Constructive or Temporary Insider
[6] The Misappropriation Theory
[7] Trading Based on Deceptively Acquired Information
-2.03 Criminal Statutes Beyond the Federal Securities Laws
[1] Mail and Wire Fraud
[2] The Crime of Securities Fraud
[3] The Crime of Conspiracy
-2.04 Rule 14e-3
[1] Introduction
[2] Initial Challenges to Scope of Rule 14e-3
[3] O'Hagan and the Future Validity of Rule 14e-3
[4] Additional Issues Involving Rule 14e-3 Liability
-2.05 RICO
[1] Introduction
[2] Legal Requirements
-2.06 The Scandal On Wall Street
[1] The Levine Case
[2] The Boesky Case
[3] Other Related SEC Investigations
[4] The Milken Case
-2.07 From Wall Street to Main Street and Back
-2.08 Hedge Funds and Insider Trading
[1] Hedge Funds and Wall Street
[2] The Use of “Information Consultants”
[3] Hedge Funds as Corporate Lenders
[4] PIPE Transactions

CHAPTER 3
Private Rights of Action
-3.01 Introduction
-3.02 Section 20A
[1] Contemporaneous Trading in Securities of the Same Class
[2] Damages
[3] Controlling Person Liability
[4] Statute of Limitations
[5] Nonexclusivity
[6] Heightened Pleading Requirements
-3.03 Implied Private Rights of Action Under Rule 10b-5
[1] Standing
[2] Duty To Disclose or Abstain
[3] Causation and Reliance
[4] Damages
[5] Statute of Limitations
[6] Secondary Liability
[7] Actions by Corporations
-3.04 Implied Private Actions Under Rule 14e-3
-3.05 Section 16(b)
[1] Beneficial Ownership
[2] “Short Swing” Profits
-3.06 Insider Trading During Pension Fund Blackout Periods
-3.07 RICO
-3.08 Shareholder Derivative Suits

CHAPTER 4
Enforcement Remedies: ITSA, ITSFEA and Other Efforts by Congress to Sanction and Deter Insider Trading
-4.01 Civil Remedies for Insider Trading
[1] Injunctive Relief
[2] Equitable Relief: Disgorgement and Related Remedies
[3] Administrative Relief
[4] Monetary Penalties
[5] Officer and Director Bar Orders
[6] SEC Enforcement Statistics
-4.02 Criminal Remedies for Insider Trading
[1] Criminal Provisions in the Exchange Act and Securities Act
[2] Mail Fraud, Wire Fraud, and the New Crime of Securities Fraud
[3] The Federal Sentencing Guidelines
-4.03 Affirmative Defenses to Enforcement Actions and Prosecutions
[1] Statutes of Limitations
[2] Laches
[3] Double Jeopardy
-4.04 Additional Provisions in ITSA and ITSFEA
[1] Insider Trading in Options
[2] Bounties Authorized by Section 21A(e)
[3] Section 20A's Private Right of Action
[4] Supervisory Requirements for Broker-Dealers and Registered Investment Advisers
-4.05 To Define (or Not to Define) Insider Trading
[1] No Statutory Definition
[2] Arguments for Statutory Definition
[3] Arguments Against Statutory Definition
[4] Proposals to Statutorily Define Insider Trading

CHAPTER 5
Exchange Surveillance Systems: Important Elements of The System to Detect Insider Trading
-5.01 The Regulatory Pyramid
[1] The Member Firms
[2] Self-Regulatory Organizations
[3] The Securities and Exchange Commission
[4] Congress
-5.02 SRO Computer Surveillance Systems
[1] SRO Trading Surveillance Systems
[2] Cooperative Computer Surveillance Systems
[3] SRO Agreement Allocating Responsibility for Insider Trading Surveillance, Investigation and Enforcement
-5.03 Limitations Inherent in Computer Surveillance
[1] The Human Element
[2] The Internet
-5.04 Global Efforts to Combat Illegal Insider Trading
[1] IOSCO
[2] SEC Office of International Affairs
[3] Memoranda of Understanding
[4] International Dialogues

PART TWO:
CORPORATE COMPLIANCE PROGRAMS

CHAPTER 6
Legal and Practical Importance of Compliance and Ethics Programs
-6.01 Designing an Effective Compliance and Ethics Program
[1] Reasons for a Compliance and Ethics Program
[2] The Hallmarks of an Effective Compliance and Ethics Program
-6.02 Controlling Person Liability and Respondeat Superior
[1] Controlling Person Liability Under Section 20(a)
[2] Liability for Civil Penalty Under Section 21A
[3] Respondeat Superior Liability
[4] Compliance and Ethics Programs as a Defense to Secondary Liability
-6.03 Insider Trading Compliance Programs Mandated by Federal Securities Law
[1] Sections 15(f) and 204A
[2] Investment Advisers Act Rule 206(4)-7 and Investment Company Act Rule 38a-1
[3] Investment Advisers to Hedge Funds
-6.04 Public Pension Funds

CHAPTER 7
Corporate Compliance Programs for Securities Issuers: Trading and Corporate Disclosure Issues
-7.01 Introduction
-7.02 Trading in the Securities of the Issuer
[1] The NYSE Manual and the AMEX Guide
[2] Other Appropriate Procedures for Trading by Corporate Insiders in the Issuer's Securities
-7.03 Disclosure Requirements Imposed on Issuers by Self-Regulatory Organizations
[1] General SRO Requirements for Prompt Disclosure
[2] Specific SRO Requirements Regarding Rumors, Unusual Market Activity, and Promotional Disclosure
[3] SRO Enforcement of Disclosure Requirements
-7.04 Mandatory Disclosure Under the Federal Securities Laws
[1] The Traditional Framework of Periodic Disclosure
[2] CEO/CFO Certification Requirements
[3] Real Time Disclosure
-7.05 Section 10(b) and Rule 10b-5
[1] Obligation to Speak Truthfully About Material Facts
[2] No General Affirmative Duty to Disclose
[3] The Practical Implications of Corporate Disclosure Responsibilities
-7.06 Projections, Forecasts, and Other Forward-Looking Statements
[1] “Bespeaks Caution” Doctrine
[2] Securities Act Rule 175 and Exchange Act Rule 3b-6
[3] Statutory Safe Harbor for Forward-Looking Information
-7.07 Insider Trading and Heightened Pleading Requirements
-7.08 Selective Disclosure to Securities Analysts
[1] The SEC's Concerns Regarding Selective Disclosure
[2] Selective Disclosure as Illegal Tipping
[3] Regulation FD

PART THREE:
INSIDER TRADING AND ULTRA-MARTS

CHAPTER 8
Ultra-Marts and Insider Trading: The Law
-8.01 The Multiple Roles of Ultra-Marts
-8.02 Competing Duties and Priorities
[1] Fiduciary Duties to Nontrading Clients
[2] Duty to the Investing Public Not to Engage in Insider Trading
[3] Conflicts Manifest
-8.03 Attribution of Knowledge Within Ultra-Marts in Establishing Securities Law Violations
[1] General Principles of Attribution
[2] The Entity Defense in Rule 10b5-1
-8.04 Contexts for Insider Trading Violations Within Ultra-Marts
[1] Various Contexts for Employee Liability
[2] Contexts for Institutional Liability

CHAPTER 9
Chinese Walls and Other Measures Designed to Segregate Material, Nonpublic Information Within Ultra-Marts: The Legal Authority
-9.01 Introduction
-9.02 Origins: The Rise of the Chinese Wall
[1] The Merrill Lynch Proceeding
[2] The Slade Case
-9.03 Codification in SEC Rules
[1] Rule 14e-3
[2] Rule 10b5-1
[3] Investment Companies and Investment Advisers: Rule 17j-1 and Rule 204A-1
[4] Research Departments
[5] Trading Ahead of Research Reports
-9.04 Statutory Codification
[1] ITSA
[2] ITSFEA: Mandatory Chinese Walls
[3] The Sarbanes-Oxley Act of 2002 and Analysts' Conflicts of Interest
-9.05 Examples of SEC Reliance on Chinese Walls in Settlement Proceedings
[1] The First Boston Case
[2] The Kidder, Peabody Case
-9.06 Extension of Chinese Walls to Other Contexts
[1] Rules Permitting Specialist Trading Activities by Broker-Dealers
[2] Commercial Banks
[3] Creditor Committees
[4] Law Firms
-9.07 Chinese Walls Designed to Reduce the Conflicts Facing Securities Analysts
[1] Mounting Concerns About Conflicting Interests
[2] Regulation AC
[3] The Global Settlement
[4] NYSE and NASD Rules to Separate Research Analysts from Investment Banking Activity

CHAPTER 10
Practical Measures Designed to Detect and Prevent Insider Trading Within Ultra-Marts
-10.01 Compliance Officers
-10.02 Chinese Walls
[1] Rationales for Chinese Walls
[2] Techniques and Procedures
[3] Practical Difficulties
[4] A Case Study in Information Control: A Law Firm's Policies and Procedures
-10.03 Watch Lists
[1] Rationales
[2] Techniques and Procedures
-10.04 Restricted Lists
[1] Techniques and Procedures
[2] SEC Rules
[3] Practical Problems
-10.05 Rumor Lists
-10.06 Employee Trading Policies
[1] Trading Restrictions for Persons with Access to Material, Nonpublic Information
[2] Trading Restrictions for Securities Analysts
[3] Trading Restrictions for Investment Adviser Personnel
-10.07 Conclusion

Appendices
Table of Abbreviations
Index

Ralph C. Ferrara



Ralph C. Ferrara is the Managing Partner of the Washington, D.C. office of Dewey & LeBoeuf LLP. His practice includes a wide range of business regulatory and corporate governance matters; representing corporations and individuals in complex securities class and shareholder derivative actions; advising corporate clients on Securities and Exchange Commission reporting and disclosure requirements; representing corporations and individuals in government investigations and enforcement proceedings; and conducting corporate internal investigations and counseling corporate officers, committees and boards on these matters. Mr. Ferrar has argued on five occasions before the United States Supreme Court, and he has appeared in each of the Federal Circuit Courts of Appeal and represented clients in state and federal courts across the country.

From 1978-1981, Mr. Ferrara served as General Counsel of the Securities and Exchange Commission. Prior to that, Mr. Ferrara was a trial attorney, special counsel, and branch chief in the Commission's Division of Enforcement, where he participated in numerous court proceedings. During his career with the Commission, Mr. Ferrara also has acted as Executive Assistant or Special Counsel to three Chairmen, Assistant General Counsel, and Special Counsel to the Chairman.

Customers who bought this item also bought

• Securities Regulation: Liabilities and Remedies.
• Takeovers & Freezeouts.
• Securities Practice and Electronic Technology.
• Public Companies.
• Attorney Liability After Sarbanes-Oxley.
• Securities Law: A Guide to the 1933 and 1934 Acts and their Amendments, including Sarbanes-Oxley and Dodd-Frank
• Directors and Officers Liability: Prevention, Insurance and Indemnification
• Information Security Law: Control of Digital Assets.
• Report on Chinese Service Outsourcing Industry, 2011-2012
• White Collar Crime: Business and Regulatory Offenses.