The Elkind court's adoption of a "disgorgement measure" of damages for insider trading on undisclosed misrepresented material information in the open market is basically sound. In allowing compensation to the extent practicable, the Second Circuit chose the best solution among the available alternatives. The decision's paramount problems arise in its shifted emphasis to deterrence; the court has neither provided plaintiffs with a sufficient incentive to sue nor created the level of deterrence that some cases might require. Future courts, however, can remedy this situation if they follow Elkind and also award punitive damages in cases in which plaintiffs' losses exceed defendant's profits.
John B. Grenier,
Damages for Insider Trading in the Open Market: A New Limitation on Recovery Under Rule 10b-5,
34 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol34/iss3/5