An economic analysis of trading on private information by external administrators: international comparisons

Research output: Contribution to journalArticle

Abstract

This paper examines the regulation of trades in listed securities by external administrators (EAs), such as trustees in bankruptcy, liquidators, receivers, and administrators on the basis of private information. We consider the economic policy issues associated with such trades. The principal considerations counsel in favour of taking a permissive approach. These are: the difficulties of associating trades with insider information, given the EA's necessarily short expected holding period, the asymmetric application of the insider trading prohibition to sales (rather than decisions not to sell), the market incentives not to misuse private information that apply to EAs, and the unlikelihood that the EA has monopolistic access to the information in question. We consider these considerations by reference to a number of hypothetical scenarios. The paper argues that the law should regulate the subject by coupling a broad exemption for EAs with a "goiod faith" proviso, a continuous disclosure obligation, and a requirement to sell "all or nothing" of a holding of listed securities.
LanguageEnglish
Pages421-464
Number of pages43
JournalJournal of Corporate Law Studies
Volume4
Issue number2
Publication statusPublished - Oct 2004

Fingerprint

international comparison
economics
bankruptcy
exemption
Economic Policy
sales
faith
obligation
recipient
incentive
scenario
regulation
Law
market

Keywords

  • regulation of trades
  • listed securities
  • external administrators trading
  • private information

Cite this

@article{6f79a0bb164e47ab87d9ebe97dc62b8c,
title = "An economic analysis of trading on private information by external administrators: international comparisons",
abstract = "This paper examines the regulation of trades in listed securities by external administrators (EAs), such as trustees in bankruptcy, liquidators, receivers, and administrators on the basis of private information. We consider the economic policy issues associated with such trades. The principal considerations counsel in favour of taking a permissive approach. These are: the difficulties of associating trades with insider information, given the EA's necessarily short expected holding period, the asymmetric application of the insider trading prohibition to sales (rather than decisions not to sell), the market incentives not to misuse private information that apply to EAs, and the unlikelihood that the EA has monopolistic access to the information in question. We consider these considerations by reference to a number of hypothetical scenarios. The paper argues that the law should regulate the subject by coupling a broad exemption for EAs with a {"}goiod faith{"} proviso, a continuous disclosure obligation, and a requirement to sell {"}all or nothing{"} of a holding of listed securities.",
keywords = "regulation of trades, listed securities, external administrators trading, private information",
author = "Hillier, {David J.} and Allan Hodgson and Andrew Marshall and Whincop, {Michael J.}",
year = "2004",
month = "10",
language = "English",
volume = "4",
pages = "421--464",
journal = "Journal of Corporate Law Studies",
issn = "1473-5970",
number = "2",

}

TY - JOUR

T1 - An economic analysis of trading on private information by external administrators: international comparisons

AU - Hillier, David J.

AU - Hodgson, Allan

AU - Marshall, Andrew

AU - Whincop, Michael J.

PY - 2004/10

Y1 - 2004/10

N2 - This paper examines the regulation of trades in listed securities by external administrators (EAs), such as trustees in bankruptcy, liquidators, receivers, and administrators on the basis of private information. We consider the economic policy issues associated with such trades. The principal considerations counsel in favour of taking a permissive approach. These are: the difficulties of associating trades with insider information, given the EA's necessarily short expected holding period, the asymmetric application of the insider trading prohibition to sales (rather than decisions not to sell), the market incentives not to misuse private information that apply to EAs, and the unlikelihood that the EA has monopolistic access to the information in question. We consider these considerations by reference to a number of hypothetical scenarios. The paper argues that the law should regulate the subject by coupling a broad exemption for EAs with a "goiod faith" proviso, a continuous disclosure obligation, and a requirement to sell "all or nothing" of a holding of listed securities.

AB - This paper examines the regulation of trades in listed securities by external administrators (EAs), such as trustees in bankruptcy, liquidators, receivers, and administrators on the basis of private information. We consider the economic policy issues associated with such trades. The principal considerations counsel in favour of taking a permissive approach. These are: the difficulties of associating trades with insider information, given the EA's necessarily short expected holding period, the asymmetric application of the insider trading prohibition to sales (rather than decisions not to sell), the market incentives not to misuse private information that apply to EAs, and the unlikelihood that the EA has monopolistic access to the information in question. We consider these considerations by reference to a number of hypothetical scenarios. The paper argues that the law should regulate the subject by coupling a broad exemption for EAs with a "goiod faith" proviso, a continuous disclosure obligation, and a requirement to sell "all or nothing" of a holding of listed securities.

KW - regulation of trades

KW - listed securities

KW - external administrators trading

KW - private information

M3 - Article

VL - 4

SP - 421

EP - 464

JO - Journal of Corporate Law Studies

T2 - Journal of Corporate Law Studies

JF - Journal of Corporate Law Studies

SN - 1473-5970

IS - 2

ER -