Tuesday, October 27, 2009
Legalize It: Insider Trading Is a Victimless Crime, Says James Altucher
James Altucher, managing director at Formula Capital, believes that insider trading should be legalized after the fallout of the Galleon Group. Altucher feels that insider trading should be legalized because "it's a victimless crime, almost impossible to prosecute, and a big waste of taxpayer money". He also feels that the SEC should be focusing on tracking down frauds and the next Madoff or Enron. Additionally, he believes that insider trading can have the same positive effect on the market similar to the role that speculators play in leveling prices. It is an interesting proposition, but a most unlikely one.
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3 comments:
I think Altucher raises some very interesting points of view, but when everything is said and done I don't think that insider trading should be legal at all - it would totally disregard the concept of a level playing field in the market not to mention that CEO's and employees who would take advantage of the insider trading would make small fortunes simply by arbitraging information and misinformation.
Wow. This is a first. I can't say I have read an article that is in favor of insider trading. I completely disagree with this argument. Insider trading gives individuals huge advantages over the rest of the playing field and the benefit is completely centered on the individual(s) with the information. I agree that there is no even playing field when it comes to dealing with stocks, but insider trading only widens that playing field. I can't imagine insider trading ever getting far on Capital Hill. Sorry Raj Rajaratnam.. you're screwed.
I find it absurd for insider trading to be called a 'victimless crime'. It is pretty obvious that everyone else who did not act on the illegal non public information is a victim. While one can argue that better information leads to better price, it is absolutely false in this context. Given privileged information, one would use it for its own benefit, not to share information with the market. This leads to the manipulation of information and ultimately price to ones advantage. Ultimately, it is because the social cost of insider trading is higher than the private cost that it is banned.
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