ABSTRACT
In the beginning, there was no such crime as insider trading. A New York court ruled in 1868 that directors of a corporation owed no duty to disclose nonpublic information about their company before buying or selling its stock. William O. Douglas, then a professor at the Yale Law School and later chairman of the Securities and Exchange Commission (SEC) and Supreme Court justice, complained in 1934 of insider trading and some very WorldCom and Enron-like practices. The SEC's invention of this crime called insider trading was based on the moralistic ground that it was unfair to allow people to profit simply because they have privileged access to information. Critics of the SEC’s insider trading charges further claim that, even when an inside trader moves the market substantially, such trading is a good thing, making the markets more efficient in pricing a stock for its real value, ahead of the delayed reports in SEC-required disclosures.
