2/03/2020

Insider Trading and Nontrading

"In late 2019, the House of Representatives passed the Insider Trading Prohibitions Act with the intent of further restricting stock market trading based on nonpublic information, by seeking to clarify what constitutes “insider trading.” In a Wall Street Journal op-ed, Lyle Roberts recently criticized the bill for making the law more confusing ( “The Insider Trading Law is Bad. Will Congress Make It Worse?,” Jan. 10).

Maybe so. My concern is more general, that basic insider trading law maintains the distorting effect of a legal asymmetry that was pointed out years ago by my former colleague (and close friend) at Clemson University, the late Myles Wallace: Corporate officers can’t benefit legally from insider information through trading, but they can gain from nonpublic information through “insider nontrading” (which can be hidden from SEC scrutiny)."