Key Principles in U.S. Securities Law: A Comparative Overview with Iranian Regulations
Introduction U.S. securities law is shaped by a combination of statutory frameworks and regulatory enforcement that define the obligations of corporate insiders, board members, and large shareholders. This blog outlines core principles of the U.S. approach to insider trading, director indemnification, and investor protections followed by a comparative overview of Iranian securities and corporate law.
1. Short-Swing Profits and Shareholder Accountability
U.S. Law:
Under Section 16(b) of the Securities Exchange Act of 1934, corporate insiders — including officers, directors, and shareholders owning more than 10% of a company’s stock — must return any profits earned from buying and selling securities within a six-month period. This rule is intended to deter short-term market manipulation and protect ordinary investors.
Iranian Comparison:
While Iranian law prohibits insider trading and manipulative practices under the Securities Market Law, it lacks a direct equivalent to the U.S. short-swing profit rule. The Commercial Code and capital market regulations outline general duties for shareholders but do not specify precise trading timelines or thresholds.
2. Director Indemnification and Legal Costs
U.S. Law:
Many U.S. corporations include provisions in their bylaws or employment contracts that allow advance payment of legal expenses to directors and officers involved in corporate litigation. This indemnification may occur before any final judgment, promoting confidence in leadership roles.
Iranian Comparison:
In Iran, directors generally bear their own legal costs unless specifically authorized by the company’s shareholders or governing documents. Indemnity insurance is not yet a widespread practice, and no formal legal provision guarantees cost reimbursement for directors.
3. Insider Trading Responsibilities and Tippee Liability
U.S. Law:
The U.S. takes an expansive approach to insider trading enforcement. Liability extends beyond corporate insiders to include tippees — individuals who receive and act on confidential information improperly shared. Additionally, under the misappropriation theory, even those without an official company role may face charges if they use confidential information for personal gain.
Iranian Comparison:
Iranian law criminalizes insider trading in general terms but does not yet fully adopt U.S.-style doctrines like tippee liability or misappropriation theory. Enforcement mechanisms are limited, with few high-profile cases reaching courts or resulting in penalties.
4. Derivatives and Investor Protections
U.S. Law:
Investors in derivative instruments like call and put options are protected under anti-fraud provisions if misleading disclosures or omissions affect the value of the underlying securities. The SEC actively enforces violations that distort derivative markets or harm investor interests.
Iranian Comparison:
Iran’s financial markets are still developing infrastructure for derivatives. While regulatory attention is increasing, clear legal protections for derivatives traders remain underdeveloped, and practical enforcement remains minimal.
Conclusion: Bridging the Gap Between Legal Frameworks
The U.S. securities system offers a detailed and dynamic regulatory model, protecting investors through statutory rules, case law, and active enforcement. In contrast, Iranian securities law emphasizes ethical principles and basic investor safeguards but lacks the granular detail and consistency seen in U.S. practice.
As Iran continues to modernize its financial system, legal reform and stronger enforcement mechanisms could play a key role in attracting investment and boosting market credibility.
At Iranlaw, we help clients navigate complex cross-border legal frameworks, including securities compliance, corporate governance, and international investment laws. Whether you are an investor, board member, or corporate officer, our experienced legal team can provide tailored advice and regulatory insights.
📞 Contact us today for a consultation or more information about compliance with U.S. and Iranian securities regulations.
Written by Amin Alemohammad | 1844IranLaw.com