Revisiting Insider Trading: Conceptual Basis and Theoretical Underpinnings

Insider trading is still one of the most contentious ideas in securities law, with a history of doctrinal ambiguity and theoretical dispute. The theoretical foundation for outlawing insider trading still vacillates between conflicting justifications including equity, fiduciary duty, property rights, and market integrity after decades of enforcement and research. By critically analysing the theoretical underpinnings of insider trading and the moral presumptions that support regulatory action, this paper revisits the topic. It examines how more general market-based explanations that emphasize investor confidence and informational equality clash with classic fiduciary-based theories that rely on violations of duty and trust. The study also examines economic arguments that raise concerns about whether insider trading is a mechanism that improves market efficiency by speeding up price discovery or if it is dangerous by nature. The paper emphasizes the conflict between utilitarian arguments centred on market outcomes and moral intuitions about justice by placing insider trading legislation within the frameworks of both legal philosophy and financial economics. It also takes into account how contemporary advancements like intricate organizational structures, algorithmic trading, and internationalized capital markets challenge traditional notions of insider status and insider information. The paper makes the case that current legal systems frequently mix up different theoretical explanations, which leads to doctrinal inconsistencies and erratic enforcement.