It’s one thing for a firm to guard its own secrets, and enforce those rules with internal sanctions. But government regulations on insider trading is criminalizing knowledge as such, insofar as it is not in a press release, an notion which wars against the very idea of entrepreneurship.
Such thoughts arise in connection with the news that 13 top Wall Street traders were arrested for trading on insider knowledge. Even other traders who followed their lead – without actually having been given information – were arrested as well. The news story describes the deals as “scams” but the reality is that not one person was hurt in this business. The profits are so high precisely because the information on which they based their trades is artificially scarce, due to regulations.
For more on the topic, see Machan “The Morality of Insider Trading,” Rothbard from Making Economic Sense (book here), Mercer on “Communism in Capital Markets,” Anderson on “The Attack on Martha.“, and Padilla on why the government itself is the true source of trouble here.
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This is another instance of busybody legislators interferring with legitimate civil functions and corporate charters. If the owners have an issue with insiders then they can define in the corporate charter what to do and sue for damages if the insiders violate the charter.
Also, Wall Street folks ARE NOT INSIDERS. Insiders are on corporate boards and senior employees. It is not a crime to have an insider open their big mouth and give information. It is not a crime for the Wall Street folks to purchase this information. It is a civil matter between the owners and the insiders when the insiders break the corporate charter.
This isn’t that hard or really that complicated.
I consider myself a left-leaning libertarian, and think that the nasty realtionship that businesses and government have are disgusting and lead to the excesses of the military-industrial and prison-industrial complexes, et cetera, so I wouldn’t consider myself a “friend of business.” This really makes my blood boil, though. Insider trading laws are just ways for overzealous prosecutors (a la giuliani and also spitzer and blumenthal more recently) to look like a fighter for the common man, and since these people are rich and white, and insider trading is a political crime (involves class and elitism, or at least perceptions thereof; similar to the “crime” in durham, NC as rape is now a political crime), major points can be scored among leftists and “nonthinking” minorities (those who allow themselves to be defined and make all/most decisions on the basis of their group, instead of being an individual).
these are all major signs of a police state: ambiguous laws, guilty ’til proven innocent, probably gag orders on the defense (even though the attorney general is already laying an all-out assault on them in the court of public opinion), and the dreaded plea bargain (read bribes to get underlings to say anything against the “big fish,” information obtained this way is about as reliable as the information obtained in abu ghraib). The neighbor, though, laps up the government stories without an ounce of incredulity, oh how the american people have fallen.
On a related note, the SEC has frozen the assets of unknown traders who purchased call options on TXU ahead of its buyout announcement.
http://www.reuters.com/article/mergersNews/idUSN0240431620070302
How the SEC knows they are “insiders” when it doesn’t even know who they are is left unstated.
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