Federal law restricts insider trading. Yet these restrictions operate differently on insolvent or bankrupt firms. The law is more constraining in some respects: federal law extensively regulates the trading of residual claims in solvent firms but not insolvent firms. However, the law is more constraining in other respects: insider trading law does little to limit debt-trading at solvent firms, but a bankruptcy enmeshes all creditors in a web of insider trading rules. This Article identifies insolvency’s economic and legal influence on insider trading law and then normatively evaluates this transformation.
Insider Trading: Are Insolvent Firms Different?,
13 Brook. J. Corp. Fin. & Com. L.
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol13/iss1/4