The SEC prohibits insider trading through the statutory provisions only when the monetary benefit is earned by the insider for himself. The SEC decided to amend the law and the action can be brought even when there is no monetary benefit to insiders. The commission did not follow the procedure of rulemaking and simply announced the law. An objection against the law was brought by a stock brokerage firm on the ground that the rule was made without giving any opportunity for public comments. The rule was ultimately challenged before the federal appellate court. To find: The effect of considering the rule merely as an interpretive rule.

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Chapter 23, Problem 4RE

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Case summary:The SEC prohibits insider trading through the statutory provisions only when the monetary benefit is earned by the insider for himself. The SEC decided to amend the law and the action can be brought even when there is no monetary benefit to insiders. The commission did not follow the procedure of rulemaking and simply announced the law. An objection against the law was brought by a stock brokerage firm on the ground that the rule was made without giving any opportunity for public comments. The rule was ultimately challenged before the federal appellate court.

To find: The effect of considering the rule merely as an interpretive rule.

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