Comments on: A Reflection on Insider Trading and Confidence in Markets

By: mandeville

mandeville — Mon, 16 Nov 2009 00:08:00 +0000

Regulating insider trading is nonsense. People who advocate it are “conditioned” to think its fair, when it’s the exact opposite. All human action is based on the specific information people hold. It is not immoral that this information is unevenly distributed. The attempt to regulate the distribution of information is futile as well as immoral.

Even if you outlaw insider trading, some people still receive the information faster than others when it is released. Using the logic of the regulators, shouldn’t that be unfair too?

Insider and outsider trading have no effect on long term stock valuations. The only thing they affect are the names on the stock certificates. People who have positioned themselves to know more than others should be allowed to invest in their knowledge. No one has a right to equal information just like they don’t have a right to equal property or education.

Short of signing confidentially contracts, insider trading is a property right. Arguing for laws against this right would be similar to establishing “fair exchange bureaus” or a “just price” for goods and services, and are idiotic. People don’t have a right to equal knowledge.

By: Methinks

Methinks — Sat, 14 Nov 2009 21:55:00 +0000

That wouldn’t happen because I would do my due diligence.

By: mesaeconoguy

mesaeconoguy — Sat, 14 Nov 2009 03:46:00 +0000

I agree with the sentiment of this piece, theoretically. Theoretically speaking, it seems like a very obvious theoretical improvement to our current situation.Information asymmetry is best resolved, theoretically, of course, by marketplace negotiation and price discovery.In theory, of course.

Theoretically, I may not be professionally allowed to express various opinions without risking regulatory scrutiny right now.

Theoretically speaking.

By: Curious

Curious — Sat, 14 Nov 2009 03:09:00 +0000

If I sell you a business for $50k and I know that the books are cooked and it’s worth only $5k, would you still claim that allowing me that trade is beneficial to all (me and you)?

By: Anonymous

Anonymous — Sat, 14 Nov 2009 00:03:00 +0000

Oh, I wouldn’t argue that it’s better to get information via insider trades. But, with fraud, that’s pretty much the only way you’ll get the information

Usually when companies get approval, they release that information right away. I’m not sure exactly how the notification process works, but the company will only hold onto the information long enough to write a press release and for the trading day to be over. Of course, that doesn’t always stop someone at the FDA trading on that information before it’s even released to the public or a senator. The senator can trade with impunity since insider trading rules don’t apply to politicians.

Also, companies generally frown upon insiders trading on material information. Many companies – particularly certain financial firms – have policies about trading any stock at all. Those rules are the creation of the company and employees who break them risk their jobs. In fact, when I worked for such a company, my husband absentmindedly bought shares in one of our accounts without first asking my firm for permission. I was hauled into the CEO’s office and my job was spared only because it was pretty obvious I wasn’t aware of the oversight and the stock had no connection to our firm whatsoever. I have no problem with company imposed insider rules – which I think work better anyway. I take issue with the SEC’s rule.