The only way I see Collins getting more than a slap on the wrist if for the Feds to use the same tactic they used in getting ImClone's Waksal to plead guilty -- threaten to go after his son for the maximum sentence.
Let’s take positive results of a phase 3 study of a biotech company as an example. The news is still not published. The insider buys shares. This additional demand drives up the share price relative to where the stock would otherwise have traded, until the news is released and the stock price jumps to the level it would have reached anyway without insider trading. Results: 1) The insider gains. 2) Stockholders who sell their shares to the insider gains, because (in all likelihood) they would have sold anyway before the news was released. Now they receive a higher price due to the added demand of the insider. 3) Stockholders who would have bought shares instead of the insider but now does not, because they are outbid by the insider, loses. Now, consider the results above. Who do you think should rightfully benefit from the rising share price? In a perfect world without a time lag between the time the study analysis is completed and the time the results are made publicly available, the stockholders who held the shares at this particular time would receive the full gain. I am sure we would all agree that this is fair and right. In a non-perfect world with a time lag, the result of the insider trading is in fact to push up the price, so the shareholders who we just agreed were the rightful owners of the gain, receive a greater part of the gain, than they would without insider trading. Based on this you could argue insider trading is a benefit for society. P.S. Significant insider "trading" goes undetected by default. When insiders refrain from trading due to inside information, where they would otherwise have traded, they can make enormous gains. This, of course, is impossible to prove and thus "a perfect crime."
That is where your argument falls apart. Insiders buying a couple thousand shares is not going to make a major dent in the stock unless it is extremely illiquid. They are getting to take a risk free trade because they always know the news while public traders have to go in blind and take all the risk. Not really a fair market and why would I invest if I know a select few have insider access. Also if the information is not public then why should insiders get to load up on shares before the information is released. Just because the result could be win win then it is ok with you. I go into the city and murder two crack heads in an alley. They were going to OD anyway so the death was going to happen anyway and I did a benefit to society so no harm. Should be legal even though murder is illegal.
I already bet @destriero dinner that Collins will not do a single day in jail. Pretty sure that's what would happen if he pleads guilty - fines and probation/community service.
Jaywalking is also a victimless crime, until somebody gets hit. The same with insider trading. You are buying/selling based on sure info, but your counter party doesn't have the same info. So he gets hit with a loss eventually. If trading is zero(or negative) sum, one's winning has to come from someone else's losing... Or using another analogy, insider trading is like selling fruits at the farmers market that are rotten inside but they look nice on the inside. Only the producer knows the truth, not the buyer...
Nope, because the counterparty would have traded anyway. In fact, the counterparty by definition gets a better price that he/she would have without the insider. Yes, someone will lose, but not the counterparty.
Let's say that you own a farm that is valued at $500K. I come along and offer you $700K for the farm. Even though you were not looking to sell, it's an offer you feel that you cannot pass up, so you sell. A week later the news announces that oil has been discovered under your old farm and the land is now worth $5 million. You now realize that I must have known about the discovery, and that's why I had offered you $700K. Are you going to feel that you have have not lost out?
In that situation you have lost out. But that is not the situation here: - you want to sell shares - you open your mobile app or online brokerage account on your laptop - you sell your shares - you receive a marginally better price than you would otherwise without knowing it The marginally better price is not what prompts the average investor to sell. The average investor most likely would have sold anyway.
Not necessarily. Stock is at $20, I put in a limit buy order for 19, trying to buy on a dip. Insider trader drops a shitload of stocks on the market pushing down the price hitting my order. Then news come out and stock falls to $5...