Insider Trading: A Stricter Diktat On Trading Window(Bloomberg)

Discussion in 'Wall St. News' started by dealmaker, May 16, 2019 at 5:55 AM.

  1. dealmaker

    dealmaker

    Insider Trading: A Stricter Diktat On Trading Window(Bloomberg)
    A recent circular from the stock exchanges mandating the period during which the trading window will have to be shut has perturbed market participants. The market regulator’s rules on insider trading say that designated persons of a company cannot trade in its securities when, as per the compliance officer, they can be reasonably expected to be in possession of unpublished price sensitive information.
     
  2. Sounds like the diff from former, "you're not supposed to do it", to "you can't do it".

    Insider trading is a form of theft! (More cryptic and subtle than taxation, but theft nonetheless.)
     
    dealmaker likes this.
  3. zdreg

    zdreg

    Insider trading should be legalized,
    https://www.forbes.com/sites/jeffre...nize-the-victims-of-current-law/#2acabc8934b3




    If insiders could trade immediately using their knowledge, prices would move as they market notices the trading. If the insiders are buying, they will likely push the stock price up. That means that current owners would win, while investors hoping to buy in will lose by having to buy at a higher price. If the insiders are selling, prices are likely to fall. In this case, current owners lose as their holdings drop, but that means that new buyers can get a better price.

    When insiders are forced to sit on their inside information, markets are inefficient since they do not incorporate all relevant information. By delaying the inevitable price change that still will happen when the information becomes public, the law changes who wins and who loses, but it does not avoid it. Deprived of information, the delayed rise in prices means some investors will sell out between when insiders knew prices would rise and when they do rise; those sellers lose while the buyers of the stock during the delay win.

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    When a company has a material change in circumstances, whether good or bad, the stock is going to move up or down. That means some investors win and others lose. The timing of the stock price move simply changes who wins and who loses, but the fact that somebody does is inevitable. With insiders restricted, whoever first notices and can act on the news when released gets the advantage and the profits.

    Removing restrictions on insider trading does not open up more people to losses or to being taken advantage of by the insiders; rather, the laws just delay the inevitable and move some people to the opposite group of either winners or losers.

    With the speed of today’s information networks, many investors have access to automatic alerts on stocks they own or are considering for an investment. A company can release information at any time and make the investment field just as level as for an earnings announcement. An insider, such as a CEO, could simply announce through appropriate channels that they will be buying or selling stock in a few minutes and that would likely suffice to level the investment playing field. The SEC could even build a website specifically for such a purpose.

    Insider trading rules do not save investors from the supposed harm of insiders trading on their information. Instead, hiding information from investors mean that some people will buy or sell a stock only to lose money as soon as the hidden information is made public. In keeping insiders from profiting we are simultaneously causing innocent investors to lose capital.

    Hatred of rich corporate executives and Wall Street financiers hardly seems a valid reason for purposely making stock markets inefficient. Stock markets have joined the information age in terms of trading technology, moving from open outcry systems with floor traders to electronic trading systems that automatically pair buyers and sellers without a market maker profiting from the pairing. Surely, we can move stock markets the rest of the way into the twenty-first century by devising a more modern and rapid system of incorporating inside information into markets where all can see and benefit from a more efficient stock market.

    Follow me on Twitter @DorfmanJeffrey

    Why insider trading should be legal - CNBC.com

    https://www.cnbc.com/id/100917279

    Jul 26, 2013 - Making insider trading legal would make it clearer to individual investors that picking and choosing stocks is a sucker's game, and deter more of them from trying, to their financial benefit. Keeping it banned creates an illusion of fairness that leaves everyone worse off.

    [PDF]


    "Insider trading is a form of theft!" not at all.
     
    Last edited: May 16, 2019 at 10:37 AM
  4. dealmaker

    dealmaker

    Insider Trading Law Alert: Better The Devil You Know? Tipping Liability, Martoma and the Rise of 18 U.S.C. § 1348 (Lexology.com)
    Insider trading has frequently been splashed across headlines in recent months, with a congressman, an NFL player, a comedy writer, and a Silicon Valley executive all facing charges.1 In the background of these headlines are two legal developments that give the government greater flexibility to successfully litigate future insider trading cases, particularly those involving tipping.2 First, the US Court of Appeals for the Second Circuit’s revised decision in United States v. Martoma3 embraced a broad theory of liability under Section 10(b) of the Securities Exchange Act and Rule 10b-5 (hereinafter, collectively, “Section 10(b)”) that prohibits a party from tipping with an “intent to benefit” the recipient.