Outside Counsel

Federal Courts Lack Authority to Decide Insider Trading Criminal Cases

, New York Law Journal


Hervé Gouraige writes: The federal courts since the 1960s have imposed criminal sanctions for insider trading violations, based on a statute that authorizes criminal sanctions for violations of rules promulgated by the SEC and an SEC regulation that prohibits, without defining, conduct we have come generally to call "insider trading." Yet, in 1812 the U.S. Supreme Court held that federal courts lack constitutional authority to define criminal conduct and decide common-law criminal cases. It is time for the federal courts to get out of the business of enforcing an administrative agency's rule as a crime.

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