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- Title
What's the Harm in Issuer-Licensed Insider Trading?
- Authors
ANDERSON, JOHN P.
- Abstract
There is growing support for the claim that issuer-licensed insider trading (when the insider's firm approves the trade in advance and has disclosed that it permits such trading pursuant to published guidelines) is economically efficient and morally harmless. But for the last thirty-five years, many scholars and the U.S. Supreme Court have relied on Professor William Wang's "Law of Conservation of Securities" to rebut claims that insider trading can be victimless. This law is purported to show that every act of insider trading, even those licensed by the issuer, causes an identifiable harm to someone. This article argues that the Law of Conservation of Securities is not helpful to answering the moral question of whether insider trading is a victimless crime because it either proves too much or too little. It either proves that all profitable trades (or profitable trade omissions) in advance of firms' material disclosures are morally impermissible (an absurdity), or it tells us nothing at all about the moral permissibility of such trades. Of course, once the Law of Conservation of Securities is neutralized, other moral criticisms of issuer-licensed insider trading that rely on this law also fail. Professor Leo Katz's claim that morality does not permit one to consent to a system that openly allows issuer-licensed insider trading is offered as one example of an argument that fails once considered in light of a proper understanding of the Law of Conservation of Securities.
- Subjects
UNITED States; INSIDER trading laws; UNITED States. Supreme Court; VICTIMLESS crimes; WANG, William, 1964-; DISCLOSURE; LAW
- Publication
University of Miami Law Review, 2015, Vol 69, Issue 3, p795
- ISSN
0041-9818
- Publication type
Article