I am teaching two sections of Business Organizations this year at the University of West Los Angeles, School of Law. This is the 7th or 8th year in a row for this subject for me. One of the toughest concepts to teach is insider trading, also colloquially known as Rule 10(b)(5). Rule 10(b)(5) is called the most famous rule in the world of business law. It is tough for students to understand because there is this general belief that anyone who buys or sells stock having inside information should be shot. It is also tough because Rule 10(b)(5) says nothing about trading with inside information.
Prof. Steve Bainbridge, UCLA bus law prof extraordinaire, who is not the easiest guy to understand in the first place, has written a brilliant article laying out the basics of the concept. Insider Article Bainbridge The ban on insider trading goes hand-in-hand with fiduciary duties. Take a look.