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That's interesting. I was digging around, and this piece[1] goes into detail, but early on they summarized the rationale for insider trading laws. "One objecti
by ben509 8y ago
That's interesting. I was digging around, and this piece[1] goes into detail, but early on they summarized the rationale for insider trading laws.
"One objection is that it violates the fiduciary duties that corporate employees, as agents, owe to their principals, the shareholders (Wilgus 1910)."
That supports the theft formulation.
"A related objection is that, because managers control the production of, disclosure of, and access to inside information, they can transfer wealth from outsiders to themselves in an arbitrary and hidden way (Brudney 1979; Clark 1986)."
Again, supports the theft formulation.
"The economic rationale advanced for prohibiting insider trading is that such trading can adversely affect securities markets (Khanna 1997) or decrease the firm’s value (Haft 1982)."
This seems like the fairness argument, though.
[1]: https://www.econlib.org/library/Enc/InsiderTrading.html https://www.econlib.org/library/Enc/InsiderTrading.html
- jessaustin 8y agoit violates the fiduciary duties that corporate employees, as agents, owe to their principals, the shareholders Insider trading regs, as currently enforced in USA, get this exactly backwards. Senior C-suiters are not prohibited from trading their firm's stock. They only have to carefully choreograph that trading with respect to other events. They get as much advance time as they need to do this, and as much professional help as they (or the firm) can afford. They get all this time to scheme and pre-arrange, precisely because insider trading laws exist to hammer the lowly middle managers who would like to do their own trading on inside information. The sooner trading based on information occurs, the sooner that information is public. The effect of these regulations is to keep secrets and make misguided investment more likely. All executives of a public corporation are in a conspiracy against the investing public. Insider trading laws function precisely to punish defectors from that conspiracy. This defection should rather be encouraged, so these are yet another set of laws the effect of which is entirely backwards from their supposed justification.
- JumpCrisscross 8y agoThese are economic arguments. I was speaking solely to the law.