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Insider trading laws should be repealed. People selling shares based on nonpublic information introduces said information to the market more quickly. It's also

Insider trading laws should be repealed. People selling shares based on nonpublic information introduces said information to the market more quickly. It's also a victimless act, a willing buyer and a willing seller decide to trade based on the information they know, with shares that were purchased without any agreement to not sell them based on the information the owner knows. It's just ridiculous that Congress conducts insider trading while other people are persecuted for it. Insider trading laws are a violation of the first amendment, as restricting what I can communicate to someone else is censorship and abridgement of free speech.

hristov 13y ago
It is not a victim-less act. The person that goes into a transaction without knowing insider information usually believes they were cheated. Quite rightfully so. Your first point is wrong as well. If insider trading were legal there would be a huge incentive for insiders to keep inside information away from the public. This would lead to slower dissemination of inside information. It would also lead to great economic collapse because no-one would trust stocks anymore. Insider trading laws do not violate the first amendment because they do not restrict speech, but actions (i.e., trading).
- dreamdu5t 13y ago
  Cheated of what? Owning a share does not entitle you to profit. I fail to see what's amoral about trading based on information that other people don't know. There are no two people who know the exact same things. All trade is based on asymmetric information.
  - RobAtticus 13y ago
    Should I be allowed to sell you a car that's a lemon just because you cannot see that? If I know the engine is about to die, but you test drive it and it seems fine, is that really right?
    - maxerickson 13y ago
      Most private car sales are just like that.
      - RobAtticus 13y ago
        Hmm, surprising. Could have sworn you had at least some reasonable protections that you could sue if the owner knew of problems but failed to disclose them.
        MartinCron 13y ago
        There are protections against outright fraud, rolling the odometer back or not disclosing a rebuild title. If the engine is about to burst, caveat emptor.
    - dreamdu5t 13y ago
      That is fraud, assuming it was sold under an agreement that it should work and the seller disclosed all knowledge of problems, because the seller would be committing fraud by withholding that information. How is that comparable to insider trading? There is no fraud involved with insider trading.
      - mcherm 13y ago
        If the seller of stock fails to disclose all knowledge about problems with the company would that seller be committing fraud by withholding that information? It seems to me that the comparison is quite easy to make.
        dreamdu5t 13y ago
        Yes, if the stock is sold under the agreement that part of what is being sold is everything you know about the company. Stocks generally aren't sold under such pretense or agreement and never have been (at least not any stocks I've traded).
      - 13y ago
  - hristov 13y ago
    "I fail to see what's amoral about trading based on information that other people don't know." Seeing as how you are moving the goalposts now you probably see very clearly what is amoral about insider trading.
    - dreamdu5t 13y ago
      If it's not amoral and there is no fraud involved, then it should not be a crime.
- baddox 13y ago
  > If insider trading were legal there would be a huge incentive for insiders to keep inside information away from the public. Could you explain this claim?
  - hristov 13y ago
    Say you are an executive of a company and learn of certain piece of inside information which will affect the stock price. Say, for example your company just got a new order that will double their profits. If insider trading were permitted you would try to keep this piece of info secret for as long as possible to give you time to buy as many shares as you can. After you buy all you can you will probably want tip off your friends and family to buy all they can. All this takes time, so you would want to keep this secret for as long as possible. If insider trading is illegal you will want to announce this news as quickly as you can so that your company is viewed as being transparent and shareholder friendly.
    - jessaustin 13y ago
      Say, for example your company just got a new order that will double their profits. This sort of info is already kept secret for as long as possible, for both contractual and commercial reasons. At least if the officers are trading on it the info is leaking out in some way. So, for this specific example, allowing insider trading will decrease volatility. (I'm not convinced that's so valuable, but it's the sort of thing many people care about.) I can't think of any company that acts as if they care to be "viewed as being transparent and shareholder friendly", so apparently that isn't so important.
- rayiner 13y ago
  It's not a victimless act, but that doesn't mean it should be criminal. I'm of the opinion that most "financial crimes" are on pretty questionable footing and should just be civil suits. Of course this was a civil suit so I don't see the big deal.
- malandrew 13y ago
  What we currently have is a market with the illusion of honesty. That's what insider trading laws are there to provide. It's not real trust between counter-parties in a market. Eliminating insider trading laws wouldn't change much, just lift that veil. If everyone participating in the market knows that people can be operating at a significant and privileged informational advantage, they will just take that into account when researching the market and executing their trading strategy. They won't stop trading, just trade differently. It is likely that the repeal of insider trading laws would prompt a greater investment in discovering insider information and making that information known to the market faster. Firms that do nothing but specialize in getting insider information would crop up. Those in the know would eventually have to assume that their counter-parties may have the same information perhaps through the same information contact or through different ones that have the same info. If you really play through the scenario of removing the restriction posed by insider trading laws, you'll see that things aren't really better or worse in terms of the greater good. Without insider trading laws, there is no victim since the victim knows they are playing a different game. The laws themselves are responsible for permitting victimization to occur in the first place since it implies the expectation of trust where there often isn't any.

hristov 13y ago

It is not a victim-less act. The person that goes into a transaction without knowing insider information usually believes they were cheated. Quite rightfully so. Your first point is wrong as well. If insider trading were legal there would be a huge incentive for insiders to keep inside information away from the public. This would lead to slower dissemination of inside information. It would also lead to great economic collapse because no-one would trust stocks anymore. Insider trading laws do not violate the first amendment because they do not restrict speech, but actions (i.e., trading).

dreamdu5t 13y ago
Cheated of what? Owning a share does not entitle you to profit. I fail to see what's amoral about trading based on information that other people don't know. There are no two people who know the exact same things. All trade is based on asymmetric information.
- RobAtticus 13y ago
  Should I be allowed to sell you a car that's a lemon just because you cannot see that? If I know the engine is about to die, but you test drive it and it seems fine, is that really right?
  - maxerickson 13y ago
    Most private car sales are just like that.
    - RobAtticus 13y ago
      Hmm, surprising. Could have sworn you had at least some reasonable protections that you could sue if the owner knew of problems but failed to disclose them.
      - MartinCron 13y ago
        There are protections against outright fraud, rolling the odometer back or not disclosing a rebuild title. If the engine is about to burst, caveat emptor.
  - dreamdu5t 13y ago
    That is fraud, assuming it was sold under an agreement that it should work and the seller disclosed all knowledge of problems, because the seller would be committing fraud by withholding that information. How is that comparable to insider trading? There is no fraud involved with insider trading.
    - mcherm 13y ago
      If the seller of stock fails to disclose all knowledge about problems with the company would that seller be committing fraud by withholding that information? It seems to me that the comparison is quite easy to make.
      - dreamdu5t 13y ago
        Yes, if the stock is sold under the agreement that part of what is being sold is everything you know about the company. Stocks generally aren't sold under such pretense or agreement and never have been (at least not any stocks I've traded).
    - 13y ago
- hristov 13y ago
  "I fail to see what's amoral about trading based on information that other people don't know." Seeing as how you are moving the goalposts now you probably see very clearly what is amoral about insider trading.
  - dreamdu5t 13y ago
    If it's not amoral and there is no fraud involved, then it should not be a crime.
baddox 13y ago
> If insider trading were legal there would be a huge incentive for insiders to keep inside information away from the public. Could you explain this claim?
- hristov 13y ago
  Say you are an executive of a company and learn of certain piece of inside information which will affect the stock price. Say, for example your company just got a new order that will double their profits. If insider trading were permitted you would try to keep this piece of info secret for as long as possible to give you time to buy as many shares as you can. After you buy all you can you will probably want tip off your friends and family to buy all they can. All this takes time, so you would want to keep this secret for as long as possible. If insider trading is illegal you will want to announce this news as quickly as you can so that your company is viewed as being transparent and shareholder friendly.
  - jessaustin 13y ago
    Say, for example your company just got a new order that will double their profits. This sort of info is already kept secret for as long as possible, for both contractual and commercial reasons. At least if the officers are trading on it the info is leaking out in some way. So, for this specific example, allowing insider trading will decrease volatility. (I'm not convinced that's so valuable, but it's the sort of thing many people care about.) I can't think of any company that acts as if they care to be "viewed as being transparent and shareholder friendly", so apparently that isn't so important.
rayiner 13y ago
It's not a victimless act, but that doesn't mean it should be criminal. I'm of the opinion that most "financial crimes" are on pretty questionable footing and should just be civil suits. Of course this was a civil suit so I don't see the big deal.
malandrew 13y ago
What we currently have is a market with the illusion of honesty. That's what insider trading laws are there to provide. It's not real trust between counter-parties in a market. Eliminating insider trading laws wouldn't change much, just lift that veil. If everyone participating in the market knows that people can be operating at a significant and privileged informational advantage, they will just take that into account when researching the market and executing their trading strategy. They won't stop trading, just trade differently. It is likely that the repeal of insider trading laws would prompt a greater investment in discovering insider information and making that information known to the market faster. Firms that do nothing but specialize in getting insider information would crop up. Those in the know would eventually have to assume that their counter-parties may have the same information perhaps through the same information contact or through different ones that have the same info. If you really play through the scenario of removing the restriction posed by insider trading laws, you'll see that things aren't really better or worse in terms of the greater good. Without insider trading laws, there is no victim since the victim knows they are playing a different game. The laws themselves are responsible for permitting victimization to occur in the first place since it implies the expectation of trust where there often isn't any.