Apr
13
Jessica: Class 20
April 13, 2015 | Leave a Comment
As someone who is unfamiliar with finance and the concept of insider trading, I can see why the Second Circuit decision is troubling. For insider trading to be considered a crime, despite its victimless nature, and the fact that not much has been done to convict those truly responsible seems mindless. What is the point of calling it a crime if the law itself is not effective in sentencing the “big fish” responsible?
I can see why insider trading can be immoral but not really see a distinction as to why it should illegal. Confusing ethics and law is always a fine line to walk and can become troubling to see where one line ends and the other begins. Instead of tackling insider trading as a legal matter, I think it should just be dealt with as a moral matter. For instance, if I notice that one of my employees is wrongfully using the information gained on the job, I would fire him on the spot, no questions asked. However, since most of the people committing this crime are upper management professionals, this method could be troubling, so why not somehow audit the entire company? Again, my finance knowledge is limited, so I am unsure of how possible this is, but clearly deeming insider trading as an illegal act is not providing justice for anyone either.
As the former SEC attorney Kidney states the SEC and DOJ are unable to sentence those truly responsible because they are too preoccupied the ones further down the insider trading chain. Moreover, if they even caught those in the top positions doing the most damage to the economy and markets, would insider trading be stopped? There are certain reasons why some acts are deemed criminal and how the law tries to prevent those certain actions. One is simply by scaring, for instance the death penalty is in place to try to prevent certain acts from happening. Yet some believe the death penalty is useless considering those crimes are still occurring. Similarly, in insider trading, those in the top positions are committing insider trading because they know they will not be caught. If the SEC and DOJ are finding those guilty way below their pay grade and titles, what do they have to fear?
Additionally, the Second Circuit decision clearly shows that insider trading is strictly a kind of quid pro quo matter. If nothing is exchanged, then no insider trading act had occurred. Whether it be the nature and specificity of the law or the technicality of insider trading, some sort of exchange had to have happened. If the “exchange” never occurs or happens at a later date it would not be considered part of the deal due to past consideration. If insider trading is a victimless crime, why does there have to be an official exchange between two parties for legal action to occur. In my opinion, I think insider trading is just a rampant abuse of power and not a criminal act.
Overall, insider trading clearly is a problem but trying to convict those responsible is difficult to do. Proving that one acted on information unaware to the public and that the source was from someone directly involved and following the chain of people involved can become tricky at times. While I do believe insider trading is wrong, I think it takes more of an unethical route than an illegal one.
