Insider Trading

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Insider Trading

When reading the case of Securities and Exchange Commission v. Cuban, 620 F.3d 551 (5th Cir. 2010) I had to keep in mind what insider trading is. Insider trading is “the purchase or sale of securities by corporate insiders based on nonpublic information.” A Schneeman, The Law of Corporations and Other Business Organizations (Cengage Learning 2012).

Although what Mr. Cuban said was not necessarily public information the courts found that it was not enough to be considered insider trading with in the company, Mamma.com. The CEO of the company is not the one who disclosed the information for it to be traded, nor do I think there was any intent. I do agree with the ruling on the matter, as defined by the law.

I do not think I would have done the same thing in Mr. Cuban’s shoes, but I can see where it came from. I do not think he did anything wrong defined by the legal standards, but I do not believe it was honest, or fair by the moral standards.

Personally, I hate saying something is “right” or “wrong” but I do believe insider trading is harmful. To me insider trading is like robbing the company, it is not fair to leak out no yet public information of a company to profit from it. It puts reputations and the company itself at risk.

What comes to mine for me when it comes to The Bible and insider trading is simple. “Thou shalt not steal” Exodus 20:15 (KJV). Essentially insider trading is another form of stealing. God is very clear on this from the beginning of time. Also, I do not believe it would line up prospectively with how God wanted us to live our lives: faithfully and honestly.

There is a reason why there a civil and criminal actions brought against those who are found guilty of insider trading. It is not legally, ethically, or biblically justified to do so.

student 2 reply

jb

Personally, I am a fan of Mark Cuban as an entrepreneur and celebrity figure. Upon reading the case brief, it is to my understanding that Mr. Cuban did nothing wrong. I believe that he may have put himself in a disadvantage when he told the CEO “I’m screwed. I can’t sell.” However, I agree with the argument that Mark Cuban was only bound by confidentiality, not banned from trading. Securities and Exchange Commission v. Cuban, 620 F.3d 551 (5th Cir. 2010). Having said that, I do believe that Mr. Cubans selling of all his shares in Mamma.com to be unfair, yet still in the confines of the law. Id. The purpose of the SEC enacted rules and regulations regarding the purchasing and selling of corporate shares, mutual funds, bonds, etc. is to promote equality among investors. In other words, I am not allowed to trade off information that is confidential and not available to other investors. Therefore, I believe the court’s determination to be just in relation to the law, but not fair. I say this, yet I would do the exact same thing as Mark Cuban. Upon hearing the news, I would be upset and attempt to sell all of my shares to prevent or limit any loss on my investment. To elaborate on the ruling, to reiterate, I believe that the court’s determination was just; but if Mark Cuban had the intention to profit off of that information by selling all of his shares and placing a large amount into option contracts, put options specifically, in order to profit a large amount off of the confidential knowledge, then I would believe that the ruling would have gone in a different direction. The Holy Bible states, “Treasures gained by wickedness do not profit, but righteousness delivers from death.” Proverbs 10:2 (English Standard version). In other words, doing right is always the better thing to do, but not performing sinful acts is good as well. Mark Cuban did this; he did not necessarily act righteously, but he did not treacherously. In this sense, I do not believe this situation to be within biblical jurisdiction of the civil magistrate.