Apr
14
Blog Post #14 – Insider Trading – Tiffany Fan
April 14, 2015 | Leave a Comment
Before reading these two articles, I knew very little about insider trading, besides the fact that it was trading on inside details that were not released to the public, which is considered illegal. The article entitled “Former SEC Attorney, James Kidney, Speaks out on Court’s Insider Trading Bombshell” provided an overlook of one case United States of America v. Todd Newman and Anthony Chiasson and his general overview of his experience with these cases. I found the points that he mentioned to be very convincing and conclusive.
Former SEC attorney, James A. Kidney, talks about prosecuting smaller cases to prevent larger cases, or the broken window theory, which he finds to be insignificant and a waste of his time in terms of the damage it causes to the market. He mentions how the Commission “far too many resources on pursuing low level “insider traders” who are far removed from the corporate suite” (Wall Street on Parade). He believes that the focus needs to be on the major Wall Street people who greatly affect the market. In this age and technology, it would be difficult to track down the four to five levels away from the tipster. In the case of United States of America v. Todd Newman and Anthony Chiasson, they were three to four levels from the tipster, which makes it difficult to prove that they had insider trading information through a tipster who focused on personal benefit.
In the article entitled, “The Second Circuit Makes Sophisticated Insider Trading the Perfect Crime,” the broken window theory was compared to Eric Garner’s situation on the selling of cigarettes that could possibly top 70 dollars at maximum and the Wall Street workers who made 72 million dollars from insider trading. As Eric Garner was killed, the Wall Street workers were able to become free from hiring lawyers, which they had probably gained sums from insider trading. In this case, it seems as if Kidney proves right and the power of money goes a long way. Because of the position and the amount of money that Newman and Chiasson may have accumulated, their profits played a big role in the outcome. If a regular citizen were caught, the outcome would probably be different because these guys have the money to hire the best attorney and fight to the bitter end.
Kidney also mentions that there are some who say insider trading should be legal. Legalizing insider trading is a controversial topic itself. In one perspective, it can be seen as a crime with the victim being those who could have had the insider information, but lack it and thus, could have made a better decision. If there leaves no trust in the market, then other investors wouldn’t be trading, while the ones involved in insider trading will dominate and drive up stock prices.
If the focus is put on the middle levels, the Wall Street firms will continue to do insider trading; thus, the spotlight should be put on those who cause the most damage. At the same time, if the smaller cases are ignored, wouldn’t the low level inside traders join the issue as well knowing the focus is strayed away from them or would it bring a lesson? I think the focus should be on the larger cases of insider trading since they cause the biggest effect in the market.
