Comments on: Insider Trading: Sin or Crime? (or None of the Above?) http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/ Academic commentary on law, business, economics and more Tue, 16 Mar 2010 19:50:32 -0700 http://wordpress.org/?v=2.8.5 hourly 1 By: Doug Chartier http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/comment-page-1/#comment-82752 Doug Chartier Sat, 17 Mar 2007 01:17:09 +0000 http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/#comment-82752 Is a property right to trade on inside information a desirable form of compensation? Perhaps so, though I'm unsure how that would play out in practice. There could, for example, be incentive misalignment where insiders profit when the corporation performs poorly (e.g., though short selling or put options). Maybe that could be partially resolved by granting a limited property right to use the information only to take long positions. Is a property right to trade on inside information a desirable form of compensation? Perhaps so, though I’m unsure how that would play out in practice. There could, for example, be incentive misalignment where insiders profit when the corporation performs poorly (e.g., though short selling or put options). Maybe that could be partially resolved by granting a limited property right to use the information only to take long positions.

]]> By: Michael Webster http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/comment-page-1/#comment-82732 Michael Webster Fri, 16 Mar 2007 20:27:27 +0000 http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/#comment-82732 The move from fraud to theft skips a stop: fiduciary duties. It is basic corporate law that there are some opportunities that fiduciaries to the corporation cannot avail themselves of, even if the corporation has taken a pass on the opportunity. (Basic, but apparently complicated for Lord Black.) Insider trading law simply recognizes that some valuable information cannot be traded on by certain individuals. While I agree that it deserves its own specialized theoretical account, if we treat it as merely akin to stealing information, then we will have lost its connection basic corporate law. The move from fraud to theft skips a stop: fiduciary duties.

It is basic corporate law that there are some opportunities that fiduciaries to the corporation cannot avail themselves of, even if the corporation has taken a pass on the opportunity.

(Basic, but apparently complicated for Lord Black.)

Insider trading law simply recognizes that some valuable information cannot be traded on by certain individuals.

While I agree that it deserves its own specialized theoretical account, if we treat it as merely akin to stealing information, then we will have lost its connection basic corporate law.

]]> By: Thom http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/comment-page-1/#comment-82667 Thom Thu, 15 Mar 2007 23:23:26 +0000 http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/#comment-82667 Thanks for chiming in, Foster. I enjoyed the op-ed, and you're right on that I/T should be analyzed in terms of property rights (as Prof. Bainbridge has eloquently argued). I also think you're right that "this will likely be a purely academic discussion" because people are so inclined to view this matter in terms of vague notions of fairness. I made that same point <a href="http://www.truthonthemarket.com/2006/06/21/an-insider-trading-policy-a-monkey-would-love/" rel="nofollow">here</a>. Thanks for chiming in, Foster. I enjoyed the op-ed, and you’re right on that I/T should be analyzed in terms of property rights (as Prof. Bainbridge has eloquently argued).

I also think you’re right that “this will likely be a purely academic discussion” because people are so inclined to view this matter in terms of vague notions of fairness. I made that same point here.

]]> By: Foster Winans http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/comment-page-1/#comment-82661 Foster Winans Thu, 15 Mar 2007 22:56:01 +0000 http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/#comment-82661 Thanks for noticing my inartful column. I freely admit I am not the world's leading expert on the law, but I am smitten by the late Harry Browne's argument (<a href="http://www.harrybrown.org/articles/Insidertrading.htm" rel="nofollow">http://www.harrybrown.org/articles/Insidertrading.htm</a>) and my observations that most people I discuss this subject with seem utterly befuddled by what constitutes insider trading. But people seem to be clear that it is a crime to use what belongs to someone else (information) to line their own pockets, whether it is in the financial markets or in some other fashion. In any event, this will likely be a purely academic discussion since most people have a visceral, emotional response when a "fat-cat" like Martha Stewart gets dinged. Meanwhile, other fat-cats like the trading desks of brokerage firms, or US senators, or officers and directors who often sit on multiple boards, routinely encounter and exploit trade-able information that, apparently, does not fall under the insider trading rules. My attorney and I debated dozens of scenarios when my case was wending its way up to the Supreme Court and there were times when it all made me feel as if I'd fallen through a looking glass. The debate continues... Thanks for noticing my inartful column. I freely admit I am not the world’s leading expert on the law, but I am smitten by the late Harry Browne’s argument (http://www.harrybrown.org/articles/Insidertrading.htm) and my observations that most people I discuss this subject with seem utterly befuddled by what constitutes insider trading. But people seem to be clear that it is a crime to use what belongs to someone else (information) to line their own pockets, whether it is in the financial markets or in some other fashion. In any event, this will likely be a purely academic discussion since most people have a visceral, emotional response when a “fat-cat” like Martha Stewart gets dinged. Meanwhile, other fat-cats like the trading desks of brokerage firms, or US senators, or officers and directors who often sit on multiple boards, routinely encounter and exploit trade-able information that, apparently, does not fall under the insider trading rules. My attorney and I debated dozens of scenarios when my case was wending its way up to the Supreme Court and there were times when it all made me feel as if I’d fallen through a looking glass. The debate continues…

]]> By: ProfessorBainbridge.com ® http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/comment-page-1/#comment-82650 ProfessorBainbridge.com ® Thu, 15 Mar 2007 18:18:03 +0000 http://www.truthonthemarket.com/2007/03/15/insider-trading-sin-or-crime-or-none-of-the-above/#comment-82650 <strong>Lambert on Winans on Insider Trading as Theft...</strong> Thom Lambert has an interesting post on former insider trader R Foster Winan's op-ed on insider trading. Money quote:I’m sympathetic to Winans’ basic point that we should reconceive of insider trading as an offense based on theft, not fraud. The... Lambert on Winans on Insider Trading as Theft…

Thom Lambert has an interesting post on former insider trader R Foster Winan’s op-ed on insider trading. Money quote:I’m sympathetic to Winans’ basic point that we should reconceive of insider trading as an offense based on theft, not fraud. The…

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