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FranciscoGuzmanSecondPaper 8 - 07 May 2010 - Main.FranciscoGuzman
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| | | I've begun to revise a lot of the writing with some of these thoughts in mind. | |
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> | Jessica, I was trying to make what Eben proposed in class, to make an unexpected statement that it is undeniable. I showed with case law that the reasons to forbid insider trading, as stated so far, don't make any sense. All your comments have said from one way or another that you disagree, that it is difficult for courts to justify the law and that you believe that I should state my personal opinion on the regulation. My opinion is very clear, if the courts or legislators forbid something they should have strong reasons to justify the measure. Once they regulate a subject from a specific perspective, as here, allocating property rights in inside information to its source, they should bear the consequences of such statement, as explained in the paper. From your comments I only see the same conduct that you are criticizing me, that you don't like my paper, but at the same time I haven't read any reason or legal argument sustaining your position. The whole idea of the paper is to make a statement that law is politics and I provided court's decision that are a strong support of my argument. If you disagree I completely respect it, but I would like to see some reasons and arguments sustaining your opinion. I understand that you haven't finished editing, let me know when you are done to write a new version. | | | The United States was the first country to begin aggressively ferreting out insider trading. Today, many legal systems have followed its example in seeking to “strengthen their capital markets”. Presumably, each of their laws was enacted with goal of forbidding individuals to trade on securities based on non-public information. Americans are loath to the idea that some traders are afforded informational advantages that are unavailable to the rest of the market. However, U.S. courts have been unable to successfully ground this feeling of injustice in coherent legal arguments. The following analysis shows the efforts of the courts to protect an ideal that it is unachievable: a securities market that provides equal opportunities to all individuals. Apparently, the prohibition on insider trading is another case of contradictory reasoning defending the creed of capital markets. | |
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> | The US was actually the first country in the world to establish a ban. Additionally, if there is a prohibition, its purpose is to forbid people to trade on securities based on material non-public information and that is not presumed, it is a fact. | | | Equality in the Market
In 1961, the SEC's chairman, a Columbia Law professor named William Cary, first articulated the "disclose and abstain rule," and argued that Rule 10 b-5 could be enforced through the prosecution of insider trading. Seven years later, the Court of Appeals for the Second Circuit shared a similar "Equal Access Theory" of trading in S.E.C. vs. Texas Gulf Sulphur Co. According to the Court, the enforcement of rule 10 b-5 is purposed on the idea that investors trading on impersonal exchanges should have relatively equal access to material information.” The Court explained that protecting a level playing field for investors increases their confidence in capital markets. Put another way, in order to guarantee the survival of the market it was essential to incentivize individuals and corporations to invest their resources in it. | |
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> | The main purpose of this paragraph was to show the political idea behind the decision. If you erase that and the quotation of the decision, the paragraph does not make sense. | | | Because the design of capital markets is based on the inequality of individuals, the inaccuracy of the idea that securities markets provide equal access to information is self-evident. If all investors had the same information, they would invest in the same securities and it would be impossible for individuals to make profits. While our insider trading laws attempt to make relevant information available to all, only some investors have the tools with which to analyze it. Our securities markets are dominated by individuals whose professional solely to gathering information and predicting future results. The individual investor, solely relying on public information, cannot possibly access the same data as the sophisticated broker. |
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