California Management Review

Abstract

While still a major topic of discussion, insider trading has not been formally defined, nor is it specifically prohibited by federal statutes. Instead, the courts have been delegated the task of defining insider trading. This article provides readers the opportunity to test their understanding of insider trading by responding to several scenarios raising potential insider trading problems. The scenarios are derived from litigated cases and require the application of judicial rules involving insider trading. Your responses to each scenario can be compared to those of a sample of stockbrokers, MBA students, and undergraduate students. This article is based on a study by the authors that was presented in testimony before the U.S. Senate Securities Subcommittee in their attempt to statutorily define insider trading.

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