If You Discover Insider Trading, Can You Trade on Your Discovery?

If You Discover Insider Trading, Can You Trade on Your Discovery?

2 Mins
August 4, 2010

Riddle me this: What are the ethics and legalities of trading on the discovery of insider trading?

It seems that SMARTS Software , developed in part by Professor Mike Aitken , has now been sold to 150 brokers worldwide who use “its algortihms to scan for patterns of trading, such as unusual price and volume movements that point to attempt to rig markets.” Clearly, the results of such objective analytical discoveries cannot be made illegal (can they?). So why not just legalize all insider trading, and let companies sue employees who violate their obligations of secrecy?

Public Servants Have No Conflicts of Interest. Given all the furore over the alleged economic interests of U. S. District Judge Martin Feldman (who struck down Obama’s drilling moratorium), this is almost funny: Ken Feinberg, the dispenser of the $20 billion dollars extorted from BP, will be paid his salary by—BP! But this actually makes perfect sense within the context of contemporary Progressivism. As long as you are known to be ideologically hostile to business (if, say, you have a in the viciously anti-capitalist environmental organizations), then you are by definition “objective” in your treatment of business, and you can accept any amount of largesse from the businesses over which you rule. Indeed, I believe that it was just this sense of purity that got the hapless bureaucrats from the Department of the Interior’s Minerals Management Service in trouble. I suspect that they were Greenies, and thus believed that they could not figuratively be in bed with energy companies--even when they were literally in bed with energy company representatives .

Since I have been generally favorable toward the victims of “honest services” prosecutions, and cheered by the Supreme Court’s finding that the law was overbroad, I feel that I ought to say a word or two about the column Conrad Black has penned following his release on bail . I understand that it must be shattering for an ordinary person to be thrust into prison. Personally, I was prepared to commit suicide rather than suffer that fate (story for another day). I can understand, too, an inclination to evaluate more favorably the class of people one suddenly finds oneself thrust among. Indeed, many people have argued for conscription in the hopes of fostering just such a sympathetic outlook toward the lower classes. But sympathy does not guarantee credibility. So when Conrad Black says: “American justice . . . does convict many people, who, like me, would never dream of committing a crime in a thousand years," I dissent. That many people in prison have committed “victimless” drug crimes, I admit. That many people in prison are innocent of the specific crime for which they have been sentenced, I admit as well. But that “many” convicts “would never dream of committing a crime in a thousand years” I do not believe. And of the few convicts who actually “would never dream of committing a crime,” I suspect, the largest proportion comprises those leading businessman to whose innocence this Web site is dedicated.