The good news about yesterday's arrests is that federal authorities only arrested people who, if the allegations are correct, are truly bad guys.
There has been a lot of fear that the government was seeking to criminalize legitimate research that uncovered non-public information, which could affect the price of publicly traded securities. Much of the information we had about the nationwide insider-trading dragnet has come through leaks to The Wall Street Journal, creating an atmosphere of uncertainty and paranoia. Did the government have some new theory of insider trading that could include a much broader range of conduct?
But yesterday's arrests all seem to be based on rather straightforward applications of previously existing insider-trading law. The people involved were allegedly selling secrets they obtained from their regular employer in exchange for tens of hundreds of thousands of dollars. They allegedly understood that this information was confidential and valuable. They allegedly had signed confidentiality agreements prohibiting these disclosures.
In short, these were—allegedly—people peddling inside dope for large sums of money, in betrayal of explicit promises to their employer.
It would be nice, however, if the federal officials running the dragnet would be a bit more explicit about their theory of insider trading. Is it really as constrained as yesterday's arrests imply? Or are the hints of a more expansive view of insider trading we've read in press accounts accurate?
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