Deal Judge: It's Time To Give Up On Insider Trading
Ed. note: This is a new weekly column by Elie Mystal, Managing Editor of Above the Law Redline, wrapping up the week that was in law and finance. Elie is not a practicing attorney, and anything he says that you listen to can and will be used against you.
The Only Issue I Care About This Week: We Have Better Things to Do Than Prosecute Insider Trading. That's the title of a Justin Fox article in the Harvard Business Review. Sadly, I think he's right.
In broad strokes the world can be divided up into three types of people:
* Group 1: Yokels who hear "insider trading" and shout "rabble rabble" at someplace they think is called "Wall Street" while they sharpen their pitchforks.
* Group 2: Wealthy elites and their media spokespeople who believe insider trading is a "victimless crime" as if Peter Gibbons from Office Space is their spirit totem.
* Group 3: Prosecutors who want to be Governors and are trying to shore up the yokel vote.
It's all terrible. EVERYBODY IS WRONG ALL THE TIME. The people who care about rich people "cheating" don't even understand what insider trading is anymore. The people who cheat have priced in the risk of getting caught. Over-matched regulators bite at the ankles of symptoms while being totally unable to address root causes.
I believe that we could live in a world where people who trade on material non-public information suffered criminal penalties severe enough to make them stop. But I also believe the Mets are one bat away from being a contender. Reality, it turns out, doesn't give a crap about what I believe.
So, I don't know, screw it. "Some legal scholars have taken this to mean there shouldn’t be any prohibitions on insider trading at all, and I’m not sure they’re wrong," says Fox. My way hasn't worked. Let's start with intellectual consistency, and work backwards from there.
Your obligatory Ben Edelman reference: The Ben Edelman counter-narrative is already in full swing. He apologized. Then in Slate fellow professor Joshua Gans stood up for Edelman. Of course he blames Sichuan Garden people for forwarding a private exchange to the Boston Globe. Gans doesn't like it when Chinese food resturants and newspaper gang up on a poor Harvard professor who doesn't even have tenure yet.
But Gans also paints Edelman as a populist hero:
In Edelman’s exchange with Ran Duan of Sichuan Garden, you can see his maverick side at work. He knows this isn’t personally a big deal, but he also knows he’s complaining about the same thing he tries to hold big businesses accountable for. And if no one calls them out, the law is meaningless. Put simply, things that hurt lots of people a little bit are socially damaging, but it’s hard to initiate action against them. It is death by a thousand little cuts.
No, no, no. The law is not "meaningless" without giant dickbags like Edelman. It is not the case that the only way you can stand up for yourself is by being mean to other people. Edelman is not being a "maverick," he's being a dick, because he thought he could get away with it.
Gans writes:
I want our Harvard professors to be more like Ben Edelman and take up causes that are controversial but that they are passionate about. The moment we let them be punished disproportionately for these traits, conformity wins.
Wrong again. The moment somebody gets punished not for what they said but for the petulant, boorish manner in which they say it is the moment Harvard can begin shedding its reputation as an incubator for jerks.
Ben Edelman is not Doctor House. He's just a bully. The law does not require his temperament.
