Moderator: Dear students, Hello everyone, we are honored today invited to University of Washington (Washington state, Seattle) law school professor, Professor Donaid Clarke Chinese name is Guo Danqing, and I was a member of the same clan. Professor Guo was born in Toronto of canada. In 1977 received the Bachelor of Arts degree at Princeton University, so he have literary talent, from 1977 to 1979 to study Chinese, why his Chinese is better than me, I have a Sichuan accent, and Professor Guo is the standard of Putonghua, in 1983, received a master's degree in science at University of London school of Oriental Africa research, 1987 obtained a doctorate in law at the Harvard University. In the legal level of China economic reform over, his sentence in the criminal law, the court China execution, Chinese and the World Trade Organization and the China dispute resolution and other fields have a lot of works.

I remember the Tsinghua University also attended the seminar of law on securities market, we can see from the title of Professor Guo Danqing, he not only toInsider tradingStudy on the system of deep, but also cultural studies to Chinese very deep, you like our Chinese, I can't think of such a romantic name, so serious a subject with a very romantic name, USA anti insider tradingThe legal system-- not a round moon. General foreigners do not think such a subtitle, let us warm applause to welcome Professor Guo Danqing to give us a lecture.

Speaker: if you are interested, you can call me Lao Guo, this speech I from A to Z haven't rehearsed a, don't know how long it will take. Very glad to have the opportunity to people's University, the legal system of my American insider trading and China should draw USA legal system on insider trading, give my own views. Because there are many things especially about company law China to American study or to learn from foreign countries, especially the insider trading law America special not worth learning, I would like to explain the insider trading law American, actually it is very complicated, then I think the explanation. I don't need to confirm this system is any a country not to adopt. I mainly talk about the following three aspects, mainly talk about some America insider trading law.

On the one hand, the definition of insider trading

First of all, what is the insider trading? In fact, "insider trading" is not an objective phenomenon, not a all agree that should go against the phenomenon. "Insider trading" is a most convenient formulation. The specific content of this formulation, everyone has different understanding. I have listed below some possible definitions, are useful, but we must clearly recognize the characteristics of their own:

(a) behavior because you know some people do not know (not open) information for securities trading

This definition can of course, but if using this definition, we can't say we want to ban all insider trading, because some private information, people know and use it is to be without rebuke. For example, a International Oil Co has many oil wells in a certain country. I am a political analysts, according to my analysis and information source, I estimate that the country will soon be a coup, the new government will put the oil nationalization, will not give any compensation. This thing, the stock market is not know. So, I use my knowledge to the company's stock to sell, because I know that their value will decline. If prohibited people from their research stock trading, then, who have the incentive to produce new knowledge? Who has the motivation to study a company's operating condition?

(two) should be forbidden by law because people know that some people don't know (not open) information for Securities Trading (ought to be defined)

This course is a subjective concept, different analysts will have different interpretations. This sense of "insider trading" is a bad word, concept is not an objective, and its connotation of each analysts may be different, because everyone has there own opinions.

(three) prohibited by law because people know that some people don't know (not open) information for Securities Trading (to be defined)

This definition is useful, however, its connotation is different in each country, as prohibited by each country different things. Some countries may not prohibit such transactions, so according to the definition in those countries are not insider trading. In fact, I will explain why I think American law not absolutely prohibit such transactions. Please note, this definition would avoid a very important question, is the law should forbid what kind of trading?

Two, learn from foreign legal system condition

Why should I put forward a variety of insider trading of different definitions? To learn from the experience of others, will undoubtedly be a wise, can save a lot of time, from many of the mistakes and waste. But we must see clearly the purpose and the object reference. Specifically, if China scholars or government officials want to learn America or any national legal system of insider trading, you must first make clear our own want to ban what kind of insider trading? Be defined if applied to the American (i.e., American actually banned what insider trading) if this definition should be defined in accordance with China analysts (i.e., what Chinese should prohibit insider trading), then we can refer to. Of course, considering the reference is not equal to the wholesale import, because there may be many traits of system is feasible in China. However, if America forbidden things are not Chinese analysts to ban things, then, which did not even turn to consider, just go and have a look the experience of other countries and the practice is in accordance with the needs China requirements or Chinese.

So, I think in Chinese third definitions are noteworthy: what are we going to prohibit what kind of behavior, to encourage what kind of behavior? In fact, the definition of the securities law China is good, it will specify what kind of person is informed, then what kind of information is the insider information, and on this basis prohibits insiders to trade on inside information. From the legislative expression technology point of view, it is more clearly. Of course, marginal question will always exist, but a little imagination and courage of the judges should be operated. Of course, some similar to the insider trading behavior, Chinese securities law does not prohibit, may also be banned. For example, according to the provisions of the securities law of Chinese, O'Hagan behavior is not illegal, because it does not meet the definition of "Securities Law" article sixty-eighth "insiders" aware of securities trading information. It seems that tippees (obtain the insider information from insiders such as relatives and friends of the third people) is not in the range of sixty-eighth. However, loopholes can hardly be avoided, my speech today are not intended to criticize the legislators lack of imagination. I want to emphasize today is, purpose and the tool should be suitable for. Regardless of our third definitions of what understanding, legal system America anti insider trading is a very inappropriate tools. Is to achieve American securities and Exchange Commission (SEC) purposes, should also be regarded as a very clumsy and not the proper tools.

Three, USA anti insider trading legal system

USA legal system of anti insider trading, the two most important points:

(a) American has more than one anti insider trading system, it has several anti insider trading. The so-called anti insider trading legal system, the most famous is the Rule 10b-5, does not prohibit insider trading. The following first simply introduce the legal system American several anti insider trading.

(1) the most USA anti insider trading laws

America anti insider trading laws and regulations in the stock offer (tender offer) cases, in addition to the offeror beyond, if anyone knows from the offeror or the subject of the company about the offer of undisclosed material information, unless the disclosure of the information may not be sold the company stock. Rule 14e-3 defines the insider trading more direct, comprehensive. It doesn't matter whether you are what people care about, it is the source of information and not open to the public, he has no concept of insider, he had an insider information, as long as the information is not open, he see which information sources. Why he only applies to tender offer offer situation? Because this is a legal technical problems, it is Securities Exchange Act legislation according to (1934 Act) fourteenth (E), this article only involves tender offer. 1934 act of sixteenth (b) stipulates internal short-term trading revenues to the company. What is called short-term trading? That you buy in and sell out, and then buy in behavior during the six month, you must pay to the company. We should note, sixteenth (b) and Rule 14e-3 in contrast to the attitude of the holder. It just what kind of person you are (internal). It doesn't matter whether you have what kind of information, so of course whether information not publicly disclosed, regardless of the source of information.

But few people on every continent legal know, because in general on the basis of the "insider trading" America method, including America scholars have paid little attention to the various state law. If the insider trading is a general tort, of course you can tort law applies to all delta orThe common law, case law to prosecute, the problem is likely to be difficult to prosecute. For example, the company in California or in a state of another, then the state courts to the defendant does not have jurisdiction. Therefore, the general people like to use the federal law, and doesn't love with state law. But can not be ruled out to insider traders responsibility according to the law of tort states. But in general do not use the convenient method. Not all states prohibit insider trading, but California has a more detailed definition, what he called the insider trading provisions, I also translate into Chinese. For example, California Corporation Code 25402nd: "It is unlawful for an issuer or any person who is an officer, director or controlling person of an issuer or any other person whose relationship to the issuer gives him access, directly or indirectly, to material information about the issuer not generally available to the public, to purchase or sell any security of the issuer in this state at a time when he knows material information about the issuer gained from such relationship which would significantly affect the market price of that security and which is not generally available to the public, and which he knows is not intended to be so available, unless he has reason to believe that the person selling to or buying from him is also in possession of the information"

Translated into Chinese mean, for the issuer, its officers, directors or controller, as well as the relationship with the issuer to be directly or indirectly acquire real information public generally not known, and the issuer of any other person, when the following conditions are is banned the purchase or sale of the issuer in the state securities:

Substantial information about the issuer and the 1, obtained by the above relationship aware;

2, the information will have a significant impact on the securities of an issuer;

3, the general public can not know the information;

We must note: this definition applies only to the issuing company's internal use due to special relationship with the company and any information. Do not apply to non insider, does not apply to information from the company related insider. Finally, we use the famous Rule 10b-5 does not prohibit insider trading. It prohibits deceptive behavior.

"It shall be unlawful for any person employ any device to., scheme, or artifice to defraud, to engage in or. Any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security"

Anyone with any idea, plan or by fraud, or engaging in any sport, practice or business practices caused or will cause to the public deception and sale of securities related behavior, are illegal. Below we detailed analysis. The core concept of Rule 10-5 is fraud. What is fraud? The legal definition of fraud is where come? Fraud is a concept of common law, the common law definition of it from the state, rather than federal law concept. Fraud is not equal to all cheating. Some behavior, although may be considered cheating, but do not constitute illegal fraud. For example, when we play poker, I can give you that I have three trump card, if I really have no words, no one can tell me. Also, if I think a chair you is a very precious antiques, I want to buy, I have no need to tell you what I think it is worth? At least in the USA can say there is no need to. Therefore, fraud does not include all the deception. There is not enough proof of fraud. Then, lie is illegal in what circumstances? If I have an obligation not to cheat, then, is illegal. From this point of view, there is a question of fact fraud (did I lie?) But also a legal problem (I have no legal obligation to do not deceive you?). In conclusion, Rule 10b-5 should be understood: it prohibits fraud in the transaction process to have the obligations do not deceive people. So, don't cheat duty is where? The common law is not a federal law, but state. That is to say, the concept of common law federal law Rule 10b-5 is dependent on the number of federal law. These concepts are not under the control of the federal government. If a behavior is based on common law not unlawful deception, so Rule 10b-5 can not be used. We summarize the above said: elements of Rule 10b-5 violation behavior: (1) Act (A) have an obligation not to deceive another person (B). (2) A spoofing B. (3) the A is cheating and securities trading "relevant" ("in connection with the purchase or sale of any security"). So we must be able to explain why A is obliged not to cheat B. Where A is under an obligation not to cheat on B? As long as A within the scope of his obligations does not deceive B, he can deceive the B in other ways, also can cheat people outside the B. The problem is, what is the relationship between insider trading and fraud? Why should the provisions of an anti cheating to chase down on insider trading behavior? "Why" this problem has its historical and political reasons. I speak now is how SEC uses a against cheating rules against insider trading. We can speak a very basic problem.

Suppose you have a piece of land, I think there are a lot of oil that piece of land, so I want to buy. If I tell you I think there's a lot of oil, of course, you will not be cheap to sell me, my knowledge is of no value. In this case, when I buy your land, I have no legal obligation to tell you. So, if we change the example above, what are the results? If the owner of the land is not you, but a company. You are the shareholders of a company, I also think there is oil under the ground, but the others didn't know. If I were the president of the company, and because this position and know oil thing, if I want to buy your stock, why different? Why didn't I tell you there is oil in violation of the Rule 10b-5? According to the structure of Rule 10b-5 , not because I am inside people of company, nor because I source of information is the company, not because my information is that, not only because I didn't tell you. Because I have a duty to tell without telling you? So, why do I have an obligation to tell you? This obligation is where? This is the most critical problem. According to the classical theory of the so-called "" (classical theory) my duty is from common law trust law theory. The shareholders of the company to invest in a company, I manage their property for them, I have a special obligation to them. This obligation is borrowed from the trust law in company law, it is similar to the trustee of the trust beneficiary obligations, also called fiduciary duty (trust). But we have to bear the fiduciary duty is not any person of any other person. There must be something special, including trust relationship, just talk to go up the trust obligations. We assume no fiduciary duty to the US without what special relationship.

One of the Rule 10b-5 principle is: internal person (the trustee) have not deceive shareholders (Beneficiary) duty. However, this principle has a specific meaning to what against insider trading? It can be used in what kind of situation?

(1) the president of the company take advantage of the insider information to buy shares, what all don't say to the seller. Violation of 10b-5. The seller is the shareholder (why not shareholders have the stock to sell?) The president, so he bear fiduciary duty.

(2) the company president of using insider information to sell stock, what all don't say to the buyer. In violation of the 10b-5?

Note: the buyer does not have shareholders, so the president of his not necessarily bear fiduciary duty. So, if you want to curb the use of insider trading, insider information to buy the stock and the use of insider information to sell shares this distinction? For shareholders to sell shares and non shareholders to sell shares this distinction? The answer is obvious, there is no reason to differentiate between. But according to 10b-5 's classical theory is difficult to avoid this result. What shall I do? Use a word problem away, hoping no one would ask too many questions.

(3) the president of the company take advantage of the insider information to buy shares, but prior to the public announcement of the information content. So as not to violate the 10b-5. Why? Because there is no deceit.

(4) the president of the company take advantage of the insider information to buy shares, but previously publicly announced his intention to take advantage of the insider information to buy stocks, but not publicly announced the insider information content. Don't violate 10b-5.

This makes sense? Why not in violation of the 10b-5? Because there is no deceit. This shows, way to avoid cheating more than one (i.e., disclosure of inside information). If I have a fiduciary duty to you, when I do business with you, I can say, "I know some important information, but I won't tell you. Now you want to do business with me, you decide. "So I will not lie to you. Although I can say that the disclosure obligations, but in the end what is not required to disclose people usually imagine, not necessarily insider information itself. Of course, the president of the company due to various considerations in general less willing to do so has announced that he intends to use the insider trading stocks. But we can imagine that there will be some people don't care about this announcement behavior. It also shows that fraud based insider trading theory have many loopholes.

Rule 10b-5 two principles: we generally discuss insider trading, we are talking about insider, if not the company insider, just find a not deceive obligation can. Because it is not a company, shareholders do not assume what responsibility. Because they do not trust relationship, we must find another obligation, may be the trust relationship or other what relation, but may not be the president of the company fiduciary duty to the shareholders of the company. But SEC said casually looking for an obligation can, as long as you are in violation of the obligations, then do the sale of stock at the same time, we use the federal law to crack down on you.

One of the principles I have just mentioned there is a problem, it is only applicable to assume the fiduciary duty to the shareholders. So, there are many possible people familiar with inside information, are not employees of the company, also did not get the information from the staff of the company, so we cannot take them as quasi staff. The most famous example is O'Hagan. He is the acquirer's lawyers, to buy stock in the acquired company. If the acquired company lawyers engage in insider trading, and the acquisition of the lawyers can, a sorry distinction, it seems that judge Hand said, however, there is not a judge dare to trust obligations theory to have gone so far away. So far no one claims that similar to the O'Hagan people have a fiduciary duty to the company's shareholders, and certainly not to deceive shareholders obligations. So, how to curb access to company insider information other than O'Hagan acquiring company or the acquiring company people? The classical theory put forward a lot of challenges, a simple way is passed by the legislature is similar to the Rule 14e-3 definition and sanctions for insider trading. But SEC and Congress did not take that way. They still want to use Rule 10b-5. Using 10b-5 to what factors? There are three factors:

(1) behavior (A) have an obligation not to deceive another person (B).

(2) A spoofing B.

(3) the A is cheating and securities trading "relevant" ("in connection with the purchase or sale of any security").

The basic structure of how to use in the O'Hagan case?

(1a) human behavior: O'Hagan.

(1b) the beneficiary does not cheat duty: O'Hagan employer (possibly law firm, may be to employ a lawyer office of the acquirer company). (not the shareholders)

(LC) deception (hide what): intended to conceal his intention to deal with insider information. (not insider information itself)

(LD) this deception and securities trading "relevant"?Supreme CourtThat is in violation of the obligations of employers in that moment of insider trading.

We should note here, do not deceive deceive shareholders is it doesn't matter. Is it doesn't matter on the market whether to disclose the insider information. On the market whether to disclose your intention of insider trading and it doesn't matter. According to the theory of O'Hagan , the 10b-5 is not to protect the interests of shareholders, not the stock market integrity and normal operation, but a according to state law relations, that is the relationship between the actors and the employer. According to this theory, what is illegal to hide? Not insider information. Illegal hide their violation of the obligations of the employer. So, again under the following circumstances there is no 10b-5 problems:

(1) had no obligation. If the O'Hagan of employers said, welcome everyone to use on the acquisition of the information you learned to buy the company's stock, so no obligation to buy, so it can't be any breach of duty behavior.

(2) behavior he violates the obligations of disclosure. If the employer before the trade, O'Hagan told him to do, no cheating, so do not violate Rule 10b-5

But, according to O'Hagan's theory, in the following cases, would be in violation of Rule 10b-5:

(1) the employer is a securities company, according to its provisions, all employees for the sale of their shares, must be through the company's. Suppose a employees set up accounts in a securities company, buy stocks that account (without the use of insider information), but he did not tell the employer. So, according to O'Hagan, this is a violation of the Rule 10b-5. Because all the elements of O'Hagan are satisfied: (a) duty. (b) violation of obligation, and not tell obligation to benefit people. (c) is associated with the sale of securities "". The Supreme Court held that the breach of the obligations of employers in that moment of insider trading.

What Rule 10b-5 banned what, allowing what? In a word, in violation of the Rule 10b-5 and securities trading behavior is related to conceal shouldn't hide things behavior. The following elements are worth to pay attention:

(1) the behavior people hide things is not necessarily insider information. Hide things may make their breach of certain obligations. So, as long as he told people he intends to breach of duty, there is no 10b-5 problems.

(2) no obligation, there is no breach of duty may, did not hide the breach behavior may. With the exception of some labor law of things, between employer and employee obligations they issue between the parties, not the public pipe.

(a) to maintain employee obligations to the boss by the securities law and criminal sanctions, there is too much too. Why the contract law generally state law and tort law is not enough?

(b) since the employee obligations to the employer is the matter between them, they can agree with employee use inside information to buy the stock is no problem, employers don't give a damn. We Is it right? Think, O'Hagan , as long as his employer said do not mind, we don't care about? But even the Supreme Court had to admit that this is the inevitable conclusion that they apply theory.

(3) and securities trading of related is a difficult concept to grasp. If I have an obligation not to take advantage of the insider information, and then break my obligation, to buy the stock, the Supreme Court held that I violate the obligation is related to securities trading, but if I embezzlement of company funds, to buy the stock, the Supreme Court held that I violate the obligation is independent of the trading of securities.

Finally, I think it America anti insider trading legal system like a tiny acorns grow strong legislation judicial oak, and more like a dried jujube tree, is a thorn, but gap meet the eye everywhere, there are many loopholes.

Guo Feng.

We are very grateful to Donaid Clarke, the professor gave us a very good report from Professor Donaid Clarke's lecture, we can see that, Professor Donaid Clarke actually on our China securities law and securities regulation is very concerned about the direction of. As America friends put forward some advice to us, let us not superstitious American securities law, especially USA insider trading system, it has many flaws, these questions are worth thinking about. In fact, the securities law of our country to a great extent on the America securities law experience and lessons, especially the CSRC led a lot of people are learning to come back from the America, so they American is very emotional, the legal provisions America or even our direct write in. I combined with Professor Donaid Clarke's opinion here, legal system on insider trading for the students to suggest that the three point, let you think further in the future learning.

The first point, about the problem of insider dealing, the last two years I have also considered, but the main object of study I is false statement. Our country legislation of insider trading USA than insider trading legislation, from the law point of view, we may be more mature. Because our "stock", the State Council issued regulations of China Securities Regulatory Commission "Interim Measures against securities fraud", and the "Securities Law", "criminal law" we, we the insider trading provisions should be said to be very strict, I personally feel even more than American is tight. But it is up to the desired effect? Now professor Donaid Clarke mentioned in the dream and the reality is concerned, we should prohibit the law seems all banned, but we on the subject of insider trading, insider information and insider scope, provisions of our laws is the most comprehensive. But take a look at our investigation of insider trading case, the CSRC and the few cases, lawsuit to the court to almost No. But not to say Chinese securities trading market is no insider trading? The answer is "NO", (laughs) we insider trading is substantial, and America, and our insider trading often occurs in large firms, big institutions and bulk users, their mutual collusion, collusion and even some exchanges. But why do we so tight in the practice of law, insider trading is not effective to investigate or civil claims! This is what causes the problem, the problem is worthy of the students to think, I did not come to a complete and effective conclusion.

The second point: on insider trading theory, from the America situation, it always exists controversy. As professor Donaid Clarke first talked about Manny's point of view. The earliest I cited his views in an article inside, he in 1966 in the stock market and insider trading, he proposed a system against insider trading theory, he claims that insider trading should be encouraged, should not oppose. He put forward a lot of reasons, for example, he says the insider trading can produce incentive mechanism, the management, the company controlling shareholder of the company even if he knows the inside information, he makes use of the insider information to give oneself buy a stock, he internal management, improve the efficiency of his very relationship. In addition to the salary and bonus, but also from the stock to make money, to help his company does well. Another reason is, can save the cost, reduce the management cost, the optimal allocation of resources can be entered, also contribute to the transmission of information, such as me as chairman of insider trading, other investors watch I bought immediately followed chairman, said he must have information, everyone followed, this information passed very quickly, the effectiveness of capital he made a lot of analysis. But the opposition is a great voice, opposition to Manny's argument, a refutation, can not play the function of transmitting information, it will damage the interests of most investors. But from the control point of view, both USA SFC, SFC or China, actually we are take the prohibition of insider trading theories against, but this theory into legislation, into justice, do not have a good effect, insider trading theories like hanging in the head of a double-edged sword, play a deterrent role. In fact, deterrence is not a deterrent to every day, because a lot of insider trading are all over the place. Its reason in what place, we can further study.

The third point: as professor Donaid Clarke mentioned theory, if the students with no previous exposure may be unfamiliar, go after the students can find some of the information will know. And formerly if we read some information is clear, such as the insider trading rules, for example USA some rules must be open, otherwise prohibited transactions, another point is the trust theory, our company law which is called credit obligations. There are a number of stealing private information theory, this is some American court case. Each case America must have a theory to guide can handle more equitable, just like Donaid Clarke said, it has a problem of infectious disease, the information transmitted to which, which spread to the other, the inside information which is very typical. For example USA Lotus Limited insider trading case, a secretary of the board of directors know company insider information in the printed document, let a lot of people, after the court investigation, a total of more than 20 people know, including repair all know, so the final court judgement, some reconciliation, some plea, major elements the court decision is that she has no duty, no information is the obligation of stealing information theory, no one can steal company insider information to engage in any transactions themselves or others. These theories are worth further study and consideration we learn in the future.

I have experience of learning, I hope you will be good at thinking, to find the problem in the future, and to solve the problem. Today's report is over, let us once again thank Professor Donaid Clarke to give us a lecture.

Source: Xian into the building