End Insider Trading? Might as Well Ban Booze
Countless convictions won't stop the practice: Henry G. Manne
By Matt Cantor, Newser User
Posted Apr 29, 2014 1:51 PM CDT
Efforts to stop insider trading are about as effective as trying to ban alcohol, Henry Manne writes.   (Shutterstock)

(Newser) – Insider trading is to modern times what bootlegging was to the Prohibition era: Authorities will never be able to stop it, writes Henry G. Manne in the Wall Street Journal. Sure, prosecutors can catch plenty of perpetrators. But "the payoffs are too big and too accessible and the number of willing players too great for the practice to be significantly inhibited by scores of convictions," Manne writes. "The imagination of wealth seekers in using valuable information in the stock market will always outpace the ability of regulators to cope."

What's more, as was the case during Prohibition, the biggest culprits seem untouchable. Manne points to Preet Bharara, the New York City federal prosecutor whose own Al Capone seems to be billionaire Steven A. Cohen. The company Cohen founded, now called Point72 Asset Management, has pleaded guilty to insider trading, while "Mr. Cohen remains personally free of criminal taint." It's typically those lower in the hierarchy who end up in trouble. The ban means "the so-called corruption of otherwise good folks," Manne writes. "It is high time to stop this ridiculous posturing." Click for the full piece.

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Showing 3 of 21 comments
Apr 30, 2014 6:44 AM CDT
WHAT? end insider trading? how am i going to make the big$$$$$ now!! says JORDAN BELFORT!! aka LEO from "THE WOLF OF WALL STREET"!! (excellent movie LEO was surperb)!!
Apr 30, 2014 2:48 AM CDT
Corporations exist & are structured so the peons at the bottom get held accountable for the crimes thought up in the boardrooms lol
Apr 29, 2014 6:45 PM CDT
I think this article is foreshadowing many insider trading convictions being overturned. Last week the 2nd circuit made the following comment during an appeal of two convicted traders, Chiasson and Newman, of former SAC (Stephen A. Cohen)'s firm and Level Global, from WSJ, April 22, 2014: "In an hourlong hearing in Manhattan, judges of the U.S. Court of Appeals for the Second Circuit signaled that federal prosecutors may have taken too broad a view of insider trading, saying Wall Street needs more of a "bright line" about what constitutes a crime. At issue is whether a trader, to be guilty of insider trading, must have known a tip was illegally disclosed in exchange for a reward . Prosecutors have argued they need only show that people who used insider information knew it had been disclosed in breach of a fiduciary duty." This statement could overturn 20% of the insider trader convictions and make insider trading even harder to prosecute. What this shows is that wealthy individuals, or individuals from wealthy institutions, will complicate issues so that the law is meaningless. Poor people in our justice system often do not have attorneys, nor is one "appointed to them", and are intimidated into pleading guilty. The effect is that the law is never challenged or complicated.