From: Black Unicorn <unicorn@schloss.li>
Date: Tue, 4 Jun 1996 11:35:05 +0800
To: "Perry E. Metzger" <perry@piermont.com>
Subject: Re: Saw this on CNN: Anonymous Stock tips over IRC as bad???
In-Reply-To: <199606031918.PAA05670@jekyll.piermont.com>
Message-ID: <Pine.SUN.3.91.960603183738.20627A-100000@polaris>
MIME-Version: 1.0
Content-Type: text/plain


On Mon, 3 Jun 1996, Perry E. Metzger wrote:

> > There is a simple solution to avoiding liability.  Don't trade in your 
> > own company's stock.
> 
> In reality, of course, you are fairly safe so long as no one is
> looking for your head and you aren't trading based on company
> secrets. However, in theory, its possible to prosecute almost anyone.

Both points conceeded.

> > Such restrictions have existed for decades.  Why are you so stunned?
> 
> I guess this is all obvious to wall streeters like me, who live day to
> day with yellow xeroxed sheets being mass distributed to all employees
> informing us of the names of 150 companies that the firm has had
> peripheral dealings with recently that we aren't allowed to trade for
> some indeterminate period of time. People who don't live in regulatory
> paranoia land often just don't get that the SEC's regulatory authority
> is broad, based on very vague statutes, and capriciously
> applied. Thats reality, folks. I suppose since most people have never
> experienced it they don't understand what it's like....

For facinating discussions of why insider trading is actually good for 
the market, See e.g., Henry Manne, Insider Trading and the Stock Market 
(1966); Michael P. Dooley, Enforcement of Insider Trading Restrictions, 66 
Va.L.Rev 1 (1980); James D. Cox, Insider Trading and Contracting: A 
Critial Response to the "Chicago School," 1986 Duke L.J. 628 (1986); 
Kenneth E. Scott, Insider Trading: Rule 10b-5, Disclosure and Corporate 
Privacy, 9 J. Legal Stud. 801 (1980); Dennis W. Carlton & Daniel R. 
Fischel, The Regulation of Insider Trading, 35 Stan.L.Rev 857 (1983).

I'll sum up the general arguments for and against insider trading if 
there is enough interest.

> Perry

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