Insider trading has acquired a notoriety in the last five decades. Although governmental response has taken the form of a massive build up of legal and regulatory armamentarium ostensibly designed to nip the practice in the bud, there is an absence of consensus among scholars and commentators as to whether insider trading is indeed a phenomenon deserving only of such institutional response.Lawyers have been loathe to undertake an inquiry into the possibility that the practice might have the potential to benefit public corporations, the capital markets, and the national economy. A number of reasons account for that attitude. The first is the spectre of dishonesty or fraud that accompanies each incident of insider trading. A second explanation is the much-heralded but now moribund conception of the legal discipline as an autonomous one. Since the birth of law and economics as an alternative approach to legal scholarship, the folly of seeking to keep and preserve the law in its own intellectual compartment has become apparent. Acknowledging the strengths of economic analysis of law and the robust gains it confers to thinking about law and law reform, especially in terms of opening the eyes of the legal scholar to the socio-economic ramifications of conduct and phenomena currently subject to regulation, this thesis undertakes an inquiry into the economic and policy justifications for the current statutory prohibitions of insider trading and the accompanying regulatory/enforcement framework.
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