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The 1933 Securities Act, 1934 Securities Exchange Act and the Sarbanes-Oxley Act of 2002 all directly address insider trading.

by ben509 8y ago

JumpCrisscross 8y ago
In very limited ways. For example, the 33 Act bans short-swing trading and certain specific activity by holders of more than 10% of a stock. The vast majority of insider trading enforcement is brought forth on securities antifraud and fiduciary obligation statute interpreted through extensive case law.
- ben509 8y ago
  That's fair, but it's also generally how the modern regulatory state works: Congress lays out a rough sketch of the laws and regulatory agencies and courts hash out the details. And counting incidences of enforcement doesn't tell you where the bulk of doctrine is since someone who plainly violates the law is quickly shut down, while the authorities are forced to play cat and mouse with the ones who skirt the law.
throwawaymath 8y ago
No, they all address illegal insider trading. If all forms of legitimate trading on material nonpublic information were illegal, then information asymmetry in the market would be outlawed. That would make it impossible to legally profit using any kind of financial research.
- ben509 8y ago
  "If all forms of legitimate trading on material nonpublic information were illegal, then information asymmetry in the market would be outlawed." FWIW, I'm not expressing an opinion on insider trading, just arguing that this specific claim is overly broad. If your only relation with a company is to own stock in it, you're not an insider, but any research you do may be based on public information, but is nevertheless material and as private as you keep it. And there's a lot of research to do. The economic fable "I, Pencil" is about the sheer number of firms that any given firm is indirectly dependent on and indirectly affects. Thus, if you see shocks affecting any upstream suppliers, the shocks are public information but your knowledge that it's relevant to the firm you're invested in is private to you.

The 1933 Securities Act, 1934 Securities Exchange Act and the Sarbanes-Oxley Act of 2002 all directly address insider trading.

by ben509 8y ago

The 1933 Securities Act, 1934 Securities Exchange Act and the Sarbanes-Oxley Act of 2002 all directly address insider trading.

JumpCrisscross 8y ago

In very limited ways. For example, the 33 Act bans short-swing trading and certain specific activity by holders of more than 10% of a stock. The vast majority of insider trading enforcement is brought forth on securities antifraud and fiduciary obligation statute interpreted through extensive case law.

ben509 8y ago
That's fair, but it's also generally how the modern regulatory state works: Congress lays out a rough sketch of the laws and regulatory agencies and courts hash out the details. And counting incidences of enforcement doesn't tell you where the bulk of doctrine is since someone who plainly violates the law is quickly shut down, while the authorities are forced to play cat and mouse with the ones who skirt the law.

throwawaymath 8y ago

No, they all address illegal insider trading. If all forms of legitimate trading on material nonpublic information were illegal, then information asymmetry in the market would be outlawed. That would make it impossible to legally profit using any kind of financial research.

ben509 8y ago
"If all forms of legitimate trading on material nonpublic information were illegal, then information asymmetry in the market would be outlawed." FWIW, I'm not expressing an opinion on insider trading, just arguing that this specific claim is overly broad. If your only relation with a company is to own stock in it, you're not an insider, but any research you do may be based on public information, but is nevertheless material and as private as you keep it. And there's a lot of research to do. The economic fable "I, Pencil" is about the sheer number of firms that any given firm is indirectly dependent on and indirectly affects. Thus, if you see shocks affecting any upstream suppliers, the shocks are public information but your knowledge that it's relevant to the firm you're invested in is private to you.