First SEC case alleging credit-default-swap insider trading

Law Professor Tamar Frankel, an authority on securities law and legal ethics, applauds the Securities and Exchange Commission for bringing its first insider-trading case involving the unregulated financial world of Credit Default Swaps.

“It makes good sense for the SEC to start prosecuting in the area of credit swaps. First, one can learn a lot about this shadow market. Second, one can find out how much this shadow market engaged in violations of existing laws. Only then can regulations be drafted.

“Such regulation need not deal with insider trading — which is already prohibited — but focus on the freedoms from constraints that the actors in these shadow markets had, and how they abused this freedom. Those abuses would then be subject to regulation.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu

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