Insider trading laws were created in the aftermath of 1929 to restore trust in a system that had been thoroughly manipulated by insiders, not to remedy any perceived "unfairness".

Okay, Clark, many people have lost faith in our political system, which has "been thoroughly manipulated by insiders." However, I don't see any effort to curb insiders' influence in politics -- in fact, they seem to dominate the world of politics. True, there are limits on individual donations and so-called "soft money," but what has that accomplished?

Not sure which insider trading laws you don't like. Insiders can trade - they just have more restrictions on them.

One thing you did not point out is that most officers (insiders) of a company are making their own options awards. This seems more unfair than requiring public disclosure.

Maurice, what I'm talking about is the fact that people who make trades, having inside knowledge that the public does not yet have, can get into trouble with the law. What bothers me is that it doesn't have to be high-ranking company officials trying to manipulate the stock (the type of thing these laws were obviously written to prevent) -- anyone who has gotten hold of inside information and then acts on it to make a profit is subject to prosecution. However, people use inside information/contacts all the time to get jobs, be accepted to prestigious colleges, get the best deals on merchandise, etc. and don't have to worry about running afoul of the law. Why the double standard?

I doubt this will satisfy you Terry, but here it goes. I am also sorry if I go over territory that is basic knowledge for you. I do this to present a fuller argument to everyone that will read this.

The stock market operates on the assumption that it is efficient. One of the under-girding principles of market efficiency is the availability of information. IF trades are made on information not available to the market it degrades market efficiency, creating inefficiencies which will eventually lead to larger market problems.

Milton Freedman actually supported the position in the article, but for different reasons. Freedman felt that an insider trade, in and of itself, was a distribution of information and allowed the market to adjust accordingly. I, personally, am somewhat sceptical of Freedman's points, depending on the scale of the trades in question.

Terry

Insider trading is not illegal. You can be an insider with insider knowledge and still buy and sell stock. Perhaps you are thinking of Martha Stewart. She got into trouble because of falsifying records. She was sentenced as follows:

1 count CONSPIRACY
2 counts FALSE STATEMENTS
1 count OBSTRUCTION

Had she filed the proper paper work, not altered records and perjured herself her trade would have been legal.

Insider trading, when one in possession of knowedge not available to the general public and makes trades based on that knowledge, certanly is illegal.

To quote the Feds:
Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

I'm not really following any sort of logic here. Unlike insider trading, inheritance and genetic traits are outside of the ability of an individual to control.

A better analogy is a real estate transaction. If you know there are major repairs needed or hidden damage to a structure you must notify the buyers before selling the home. Lemon laws and the like apply to many other transactions. I agree there are grey areas but to allow blatant fraud or overt misrepresentation in business transactions risks undermining the system of trust that must exist for the economy to function.

Besides, you need the facade of trust and security to keep those workers pumping money into their 401K's. If not, the good old boys on wall street wouldn't have anyone to steal from but each other.

Aku #7

you are right about laws regarding insider trading. I am saying that if you file the proper paper work you can be an insider and still trade. It could be compared to driving. If you have a license, registration, insurance, and up to date tags, you can legally drive your car.

Here is a link to the listing of insiders that trade Micron stock. You will notice that most are either Officers or Directors of the Micron.

Okay, Maurice, let's suppose I was an insider who wanted to make a trade today on information that was going to be available to the public tomorrow. Could I always get instant approval for my trade? Could I always go ahead and legally make my trade and file the paperwork later? If the answer to either question is yes, then you might have a point.

Terry,

In your hypothetical, if you're an insider who trades, you only register once, you don't have to have specific permission for each and every trade. But if you violate the laws in your trades and are caught, you'll be prosecuted.

As Maurice pointed out above, insider trades take place every day, and are published; any decent trading site online will show you which insiders of XYZ Corp. traded today; whether they bought or sold, and how many shares.

But if you're registered, how could you violate the laws?

Terry,

Aku spells it out (with an explanation from the Fed itself) in #7.