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"Insider trading is about theft, not fairness". Many sophisticated traders have proprietary information on their positions. The key is the conflict of interest

elliekelly 5y ago
I disagree. It is about fairness to some degree. Insider trading undermines the integrity of market. Which is why Pelosi's statement here is so absurd.
- ludamad 5y ago
  I'm quoting Matt Levine, who is in turn summarizing the state of US law. That's not my personal philosophy, ftr
  - tiahura 5y ago
    Not my area of the law, but I don’t think he’s right. I think the general consensus is essentially “fairness” for utilitarian reasons. Markets are important, and insider trading discourages investment because it creates an impression of unfairness and increases uncertainty.
    - gruez 5y ago
      > Not my area of the law, but I don’t think he’s right. As far as I know that's how the law is structured. A second source that say the same thing: >KESTENBAUM: And she says while everybody gets upset at insider trading because it gives someone an unfair advantage, that is not the legal reason why it gets you into trouble. The argument used these days in court for why it's illegal is that insider trading amounts to stealing information from a company. It's like theft. And so for that reason, proving that someone traded on insider information - that is not enough to convict them. If, say, a financial document from some company blows out the window, and you happen to find it sitting there on the sidewalk, Sarah says it's not insider trading for you to use that to make money in the stock market because you didn't steal it. https://www.npr.org/transcripts/460689797 https://www.npr.org/transcripts/460689797 As for your "fairness" hypothesis, it really doesn't hold. Is it "fair" that hedge funds can afford to spend millions on alternative data sources (eg. flying helicopters with thermal cameras over oil fields, to see how much oil is being stored) to get a edge over traders who can't? Probably not. Is it banned? No. https://www.bloomberg.com/opinion/articles/2013-12-19/helicopter-edge-is-better-than-black-edge https://www.bloomberg.com/opinion/articles/2013-12-19/helico...
      - elliekelly 5y ago
        The entire basis of US Federal Securities Laws is the concept of "full and fair disclosure".
        gruez 5y ago
        1. source? 2. that sounds more applicable to sellers of securities (ie. "you can't hide stuff in your quarterly statements") than insider trading.
        elliekelly 5y ago
        Go look at the SEC’s mission statement and the full name of the ‘33 Act and ‘34 Act.
        gruez 5y ago
        >SEC’s mission statement Okay, but that's not how laws work. You can't go to the judge and say, "your honor, this person violated the SEC's mission statement and is therefore a criminal!". The mission statement might be correlated with what the law says (it might also not be, see: "to serve and protect"), but the ultimate source of truth is statues/precedence. Given that your claims contradicts what two well credentials individuals[1] claim, it seems prudent to require more evidence than just "that's SEC's mission statement". A link to the exact section of the relevant statue, or a relevant appellate court decision would do. [1] matt levine was "a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz, and a clerk for the U.S. Court of Appeals for the 3rd Circuit", and the person interviewed for the NPR story was "a defense attorney" and "now a fellow at Yale Law School". >full name of the ‘33 Act and ‘34 Act. Same argument as above.
        elliekelly 5y ago
        Yes. My mistake. I don’t know anything about federal securities laws. Thank you for explaining it to me. There’s always an expert on HN!

elliekelly 5y ago

I disagree. It is about fairness to some degree. Insider trading undermines the integrity of market. Which is why Pelosi's statement here is so absurd.

ludamad 5y ago
I'm quoting Matt Levine, who is in turn summarizing the state of US law. That's not my personal philosophy, ftr
- tiahura 5y ago
  Not my area of the law, but I don’t think he’s right. I think the general consensus is essentially “fairness” for utilitarian reasons. Markets are important, and insider trading discourages investment because it creates an impression of unfairness and increases uncertainty.
  - gruez 5y ago
    > Not my area of the law, but I don’t think he’s right. As far as I know that's how the law is structured. A second source that say the same thing: >KESTENBAUM: And she says while everybody gets upset at insider trading because it gives someone an unfair advantage, that is not the legal reason why it gets you into trouble. The argument used these days in court for why it's illegal is that insider trading amounts to stealing information from a company. It's like theft. And so for that reason, proving that someone traded on insider information - that is not enough to convict them. If, say, a financial document from some company blows out the window, and you happen to find it sitting there on the sidewalk, Sarah says it's not insider trading for you to use that to make money in the stock market because you didn't steal it. https://www.npr.org/transcripts/460689797 https://www.npr.org/transcripts/460689797 As for your "fairness" hypothesis, it really doesn't hold. Is it "fair" that hedge funds can afford to spend millions on alternative data sources (eg. flying helicopters with thermal cameras over oil fields, to see how much oil is being stored) to get a edge over traders who can't? Probably not. Is it banned? No. https://www.bloomberg.com/opinion/articles/2013-12-19/helicopter-edge-is-better-than-black-edge https://www.bloomberg.com/opinion/articles/2013-12-19/helico...
    - elliekelly 5y ago
      The entire basis of US Federal Securities Laws is the concept of "full and fair disclosure".
      - gruez 5y ago
        1. source? 2. that sounds more applicable to sellers of securities (ie. "you can't hide stuff in your quarterly statements") than insider trading.
        elliekelly 5y ago
        Go look at the SEC’s mission statement and the full name of the ‘33 Act and ‘34 Act.
        gruez 5y ago
        >SEC’s mission statement Okay, but that's not how laws work. You can't go to the judge and say, "your honor, this person violated the SEC's mission statement and is therefore a criminal!". The mission statement might be correlated with what the law says (it might also not be, see: "to serve and protect"), but the ultimate source of truth is statues/precedence. Given that your claims contradicts what two well credentials individuals[1] claim, it seems prudent to require more evidence than just "that's SEC's mission statement". A link to the exact section of the relevant statue, or a relevant appellate court decision would do. [1] matt levine was "a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz, and a clerk for the U.S. Court of Appeals for the 3rd Circuit", and the person interviewed for the NPR story was "a defense attorney" and "now a fellow at Yale Law School". >full name of the ‘33 Act and ‘34 Act. Same argument as above.
        elliekelly 5y ago
        Yes. My mistake. I don’t know anything about federal securities laws. Thank you for explaining it to me. There’s always an expert on HN!