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Many countries use U.S. insider trading doctrine as a model, in part as a result of historical and political factors and in part because the United States is seen as a market leader--an early adopter with a well developed, disaggregated, public securities market. Yet, despite these convergent beginnings and a general agreement on the nature of the regulated conduct (i.e., prohibiting securities trading by insiders possessing material nonpublic information), operative insider trading rules in the United States (as a rule originator) have evolved to protect different interests and regulate different specific market activities than insider trading rules in other countries. Using existing insider trading law and regulation in the United States, Germany, and Japan, this paper (a) identifies the common roots and divergent evolution of insider trading doctrine in these nations, (b) articulates ways in which differences in current insider trading doctrine may be meaningful, and (c) isolates possible reasons for the existence and persistence of the observed doctrinal divergence. Divergent political, economic, and societal histories, and differences in legal systems and traditions, are at issue in the analysis. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]

Why do developed countries have such different financial systems? Some nations, such as Germany, France and Japan rely extensively upon bank lending for mobilizing new capital, while others, such as the US and UK, rely heavily on capital markets?why? At the beginning of the 20th century, however, Japan and France relied far more heavily on their capital markets?why did they change? Answering these questions has implications for understanding globalization’s varying effects on national economies, corporate governance, the nature of technological innovation, and for illustrating linkages among law, politics, and macroeconomics. Existing arguments focusing on legal systems and electoral systems fail to adequately answer this puzzle. I argue that the structure of a country’s financial system depends on the political power of farmers and labor relative to that of large firms, where farmers and labor prefer banks, while big firms prefer capital markets. I test the argument with data for 14 OECD countries from 1976 -1990. I also present evidence spanning the twentieth century for France and Japan. Check author’s web site for an updated version of the paper. [ABSTRACT FROM AUTHOR]