Unfortunately the headline is mistaken. Insider trading law was only ever intended to reserve for senior executives the privilege of trading on inside information. This latest interpretation is a confirmation of that purpose, not a repudiation of it. Bharara has been a true believer, but if he's going to stray from the South Asian beat, he's going to have to learn the real rules.
Making Insider Trading Legal
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Re: Making Insider Trading Legal
#12Re: Making Insider Trading Legal
#13If everyone with inside information could trade on it without fearing the law, they would reveal the predicted effect of said information via movements in the price of the security.
Therefore, free and legal insider trading would actually increase fairness in the market.
Re: Making Insider Trading Legal
#14If "material nonpublic information" is illegal to trade on, then the entire job of the intelligent investor ceases to exist. It becomes illegal to do thorough research. So of course the source of the information matters. I'm sympathetic to the argument that it's bad to take illegally obtained data and pass it along in a don't ask, don't tell manner to avoid prosecution. But that Dell data? The guy's job at Dell was t…
"material nonpublic information" is a term of art. It means internal company information that is relevant to understanding the future financial performance of the company. Research based on outside information wouldn't be material nonpublic information.
Are you saying that "nonpublic" by itself implies that I got the information from an insider?
If someone else deduces the same information, does my copy stop being nonpublic? Or was I mistaken in thinking it was nonpublic at all, since someone could deduce the same information?
If I'm watching a company's delivery road from across the street, is all that info public even though it's only available to me and five other people in the world?
Re: Making Insider Trading Legal
#15Earlier quoted context omitted.
> It becomes illegal to do thorough research. Ridiculous. Having access to information others don't is privilege, not thoroughness. You can be just as thorough as you want, so long as others are not prevented from being likewise. Without that, capital markets cease to be open. That way lies oligarchy.
Not sure why you're getting downvoted. You're absolutely correct. Having access to insider information is about knowing people on the inside, or having some sort of special access to that information. By definition, it gives the person unfair advantage over others in the market.
"insider trading isn't about fairness, it's about theft"
Re: Making Insider Trading Legal
#16Profs Fischel and Easterbrook were working on the analytical framework (efficient continuous release of information, if i remember), starting in the 80's: http://www.law.uchicago.edu/node/514/publications
Re: Making Insider Trading Legal
#17Earlier quoted context omitted.
"material nonpublic information" is a term of art. It means internal company information that is relevant to understanding the future financial performance of the company. Research based on outside information wouldn't be material nonpublic information.
Are you saying that "nonpublic" by itself implies that I got the information from an insider? If someone else deduces the same information, does my copy stop being nonpublic? Or was I mistaken in thinking it was nonpublic at all, since someone could deduce the same information? If I'm watching a company's delivery road from across the street, is all that info public even though it's only available to me and five othe…
Yes. I'm not a lawyer and all that, but counting trucks on the street wouldn't be nonpublic information, even if it is more available to some group of outside people.
I think it is also clearly the case that concrete insider knowledge will be considered differently than deductions.
This goes on and on about the meaning of the term:
http://www.investopedia.com/exam-guide/cfa-level-1/ethics-st...
Re: Making Insider Trading Legal
#18Same article posted yesterday: https://news.ycombinator.com/item?id=10483032
I'm sorry you didn't get upvotes out of randomness or timing but it doesn't help to link a previous submission with no comments.
Thanks but I'm not looking for upvotes, I just wanted to signal that the dupe detector isn't working very well since it's the same title and url and have been posted only hours before this.
Re: Making Insider Trading Legal
#19Earlier quoted context omitted.
Not sure why you're getting downvoted. You're absolutely correct. Having access to insider information is about knowing people on the inside, or having some sort of special access to that information. By definition, it gives the person unfair advantage over others in the market.
"insider trading isn't about fairness, it's about theft"
I don't think that's true. If you have a friend on the executive board of pharma company X, and he confides in you over the phone that the internal trials for the company's next big drug failed big time and they're going to announce the results to the public tomorrow, and you dump the stock... that's insider trading. It wasn't theft. The information was willingly given to you by an insider. And it's a crime because you made a trade based on non-public information, and the law has deemed that to be unfair and illegal.
Re: Making Insider Trading Legal
#20> Many people on Wall Street felt that Bharara’s crusade against insider trading was recklessly broad: An analyst like Horvath might knowingly obtain an illegal tip, but if he feeds his information up the chain to a Steinberg or a Cohen, and they take his word that he is not passing along stolen goods, should they really go to prison for that misplaced faith? Is it fair to convict someone of engaging in insider trading if he didn’t know he was doing so at the time?
This quote is interesting. I know that in some countries (including my own,) dealing in stolen goods is in fact illegal, regardless of whether or not you knew the goods were stolen in the first place. The onus lies on the buyer of the goods to remove doubts of where the goods came from, which often amounts to simply asking the reseller for a receipt. If you're given one which is bogus, you can claim ignorance and whoever you bought it from would be guilty of fraud as well as dealing in stolen goods.
Now, I don't know what the law says about dealing in stolen physical goods in the US, but if it's anything like the above then why should illegally obtained information be any different? Shouldn't it be reasonable then to ask whoever is dealing in this information to ask for a receipt, as it were?