Insider Trading

[softwareNerd]

I would summarize this topic thus far as follows:

• Insider trading can be immoral , in situations where the insiders are acting against the interests of other non-insider shareholders, while they actually have an obligation to act in the interests of the latter
  
• Insider trading can be immoral even when trading with non-shareholders, if deceit/fraud is involved. However, apart from fraud, the usual rules of caveat emptor should apply
  
• In both the above situations, some of the immoral acts will cross the line into being illegal.
  
• This does not mean that the SEC should be doing the various pro-active policing they do today, nor even that it should exist
  
• What is and is not allowed to insiders must be left to them and their shareholders. In practice, the stock-exchange where they list the shares may also impose certain restrictions on insider sales.
  

In summary, restrictions on insider trading should be a matter of private contract. Today, the basic philosophical foundation to the law is egalitarianism. It is further crystallized in economics by Frank Knight's theories of "perfect competition". This theoretical foundation has to be scrapped, and replaced by a foundation based on property rights and private contract. It's possible that many restrictions in place today would also be applicable under a corrected framework. On the other hand, many things that are disallowed today would be allowed.