Narrower insider-trading rules may curtail prosecutions and deepen distrust

Evidence

The Rapaport controversy has made the club much more reluctant to expel membersit is concerned not only about the expelled member bringing suit, but it also fears that too many expulsions will revive the Federal Trade Commission’s interest in its activities. At present, a member is not expelled until the Board of Arbitrators first obtains a court order affirming its decision. Effective sanctions may still remain, however, since the member’s picture, along with a description of the judgment that he refused to pay will still be hung in the club room and on the trading floor of every bourse in the world federation. … Although the DDC bylaws have always given the litigants the right to be represented by a lawyer, prior to the Rapaport case it was uncommon. Today, legal representation is the norm. The arbitrators feel that the presence of lawyers has, in some measure, altered the rules of decision they apply. The lawyers alert them to relevant parts of New York law, and, while this law still does not supply the rule of decision, the arbitrators are more conscious of the law and are increasingly reluctant to drastically depart from it, except in instances where the decisions are deeply rooted in custom or do not involve creating a new rule. — Lisa Bernestein, Opting out of the Legal System, 280 (#complicates, via linked claim)

Categorization

• XREF: connects to: Opacity erodes informal enforcement mechanisms as external legal pressure reshapes insider norms. — Lisa Bernestein, Opting out of the Legal System, 280

Broader Connections

• Opacity erodes informal enforcement mechanisms as external legal pressure reshapes insider norms. #complicates (0.74) — Lisa Bernestein, Opting out of the Legal System, 280