From: gts (gts_2000@yahoo.com)
Date: Thu Jun 05 2003 - 15:53:54 MDT
Harvey Newstrom wrote:
> Why insider trading is illegal for the trader:
> There is nothing in the law that prevents people from using their own
> brains to predict stocks and make lots of money.
If you use your brain to acquire information before it is reported to the
newspapers, and act on that information, then that action can be considered
insider trading. In effect it is legal only for you to be an average
investor with average knowledge. If you do your homework too well and don't
share it with everyone else then you go to prison. Superior knowledge is a
crime.
Let us say that Martha Stewart is a genius who wrote some kind of amazing
crystal ball AI software capable of predicting the future of the business
world with perfect accuracy. One morning she fires up her AI software and
sees that the ImClone drug is not going to be approved. Martha then sells
her shares to protect herself.
Her actions and their ramifications under this scenario above would have
been no different from what they were under the actual real-world scenario.
The world look exactly the same today if Martha had acted according to her
AI software rather than on so-called inside information. The same number of
people would have lost the same number of dollars in ImClone stock. But
Martha would not now be facing criminal charges.
If the world would look exactly the same under that hypothetical AI scenario
compared to the real-life scenario, then where is the justification for the
criminal charge? Why would we say there are "victims" to Martha's "crime" in
one scenario but not in the other, when the end results of both scenarios
are identical in every respect?
-gts
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