Tony Longoria—a former AMD employee—has been charged this morning with wire fraud and conspiracy to commit securities fraud. Longoria started his employment with AMD in January, 2007 and resigned his employment on Oct 22, 2010. AMD has been cooperating with the U.S. attorney's office and will continue to do so. AMD has a clear and comprehensive policy regarding insider trading and a worldwide insider trading training program. AMD additionally has policies regarding work by its employees outside of AMD including consulting arrangements such as the so-called expert networks that appear to be at the heart of the government's insider trading investigations.
Now it might strike some investors as a bit rich that the company who was employing the executive who allegedly gave inside information to Primary Global Research was the victim here. Wasn’t it really the other investors who were victimized?
In fact, however, the AMD interpretation of who was victimized by the insider trading case aligns with the only plausible justification for a ban on insider trading enforced by federal authorities. Investor anger over insider trading is not evidence that outside investors are injured by insider trading. In fact, the best explanation for investor dislike of insider trading is that investors envy the insider’s greater access to information.
UCLA law professor Stephen Bainbridge is the most prominent advocate of the theory that insider trading is essentially theft of intellectual property, which is what AMD is claiming.
Here’s how he explains it.
To be sure, at first blush, the insider trading prohibition admittedly does not look very much like most property rights. Enforcement of the insider trading prohibition admittedly differs rather dramatically from enforcement of, say, trespassing laws. The existence of property rights in a variety of intangibles, including information, however, is well-established. Trademarks, copyrights, and patents are but a few of the better known examples of this phenomenon. There are striking doctrinal parallels, moreover, between insider trading and these other types of property rights in information. Using another’s trade secret, for example, is actionable only if taking the trade secret involved a breach of fiduciary duty, misrepresentation, or theft. This was an apt summary of the law of insider trading after the Supreme Court’s decisions in Chiarella and Dirks (although it is unclear whether liability for theft in the absence of a breach of fiduciary duty survives O’Hagan)
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