Accepting the argument made by Manne, Epstein and others that firms wishing to allow their employees to insider trade should be permitted to do so, this article shows that there is still a crucial role for government in regulating insider trading. In particular, allowing employees to profit by...

The paper explores the consequences of SEC detection of illegal insider trading on subsequent insider trading activities. We hypothesize that individuals with private information update their subjective probabilities of getting caught and are less likely to exploit material, non-public...