No Pain, No Gain: The Criminal Absence of the Efficient Capital Markets Theory from Insider Trader Sentencing

(Excerpt) This Note argues that, for purposes of criminal insider trading sentencing, courts should look to the date that the information was disclosed to determine the amount of the defendant’s gains. This point in time simultaneously signifies the conclusion of the offense and the market’s valuation of the information initially traded on. Part I will discuss the statutory prohibition on insider trading and its corresponding sentencing formula. Part II will focus on the current approaches adopted for measuring gains of insider trading in criminal sentencing, as well as other forms of securities fraud violations. Part III will identify the presence of the Efficient Capital Markets Theory in the general framework of insider trading and disclosure regulations. Finally, Part III will advance a solution to calculating gains by presuming that in an efficient market, a stock’s price reflects the previously undisclosed information upon its disclosure and therefore, concludes the accumulation of gains for sentencing purposes