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There's a huge difference between special knowledge and expertise and material non-public information that you know will move markets.

Martha Stewart didn't go to jail for having any specialized knowledge, she went to jail because someone tipped her off that a company she was invested in was about to go south. She sold those shares to someone who had no reasonable way of knowing what she knew which is essentially a type of fraud.

No. The reason that trading on insider information is illegal isn't that some third party is injured (if anything, martha's sales caused the third-party get a better price than he would have otherwise!) It's illegal because the officers of a company and the employees of a company are supposed to be doing the job of running a company for the benefit of the shareholders, and there's opportunity for some pretty massive conflicts of interest if they're also playing games trading stocks / stock-tips instead.

And also because people think it's "unfair", like the stock market's supposed to be a game or something rather than a place that you can buy and sell stock for a price which is well-correlated with the company's prospects. :P

That is the agency problem and bans on insider trading do not directly address that. The agency problem is addressed through bans short-selling and put options, as long as the officers and directors have along exposure to the share price, their interests are aligned.

The ban on inside information is intended to attract capital by ensuring that stock markets are fair and transparent. If the investing public believes that the stock market is nothing more than a con to take rubes' money capital will stay away, and keep capital from flowing to productive firms.

> If the investing public believes that the stock market is nothing more than a con to take rubes' money capital will stay away

No way - now 401ks are the only retirement savings vehicle aside from striking it rich through lottery or stocks. Guess how many people translate their investment in a mutual fund to the actual stock market shenanigans?

The point of the commodities market is to provide hedging instruments for commercial producers and consumers. It's difficult to imagine the commodities market being useful if you ban every potential customer and leave nothing but speculators.

Right. I was responding to the concept of insider trading in general, even after reading the article, I don't feel that I know nearly enough about the arcane commodities market to speak to that scenario.

She mostly went to jail for obstruction of an agency proceeding, and making false statements to federal investigators. She should have only said "I want my lawyer". Never talk to the police!

No, Martha Stewart went to jail for obstruction of justice because she lied to the investigators about someone giving her a stock tip. She likely would have been fine if she had just told the truth (or had just refused to talk).

That's splitting hairs, though. She lied because she knew that what she did was against the law. She was held up as an example not to dissuade people from lying to investigators as much as to dissuade people from insider trading.

That's not fraud.

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