Business Strategist Carol Roth: Eliminate Insider Trading Laws

Tuesday, 27 Nov 2012 08:44 AM

By Dan Weil

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Insider trading is making financial-news headlines with the arrest of a portfolio manager associated with SAC Capitol Advisors recently.

But business strategist and author Carol Roth says we would be better off dropping insider trading laws entirely. The time and effort spent on high-profile insider trading cases over the past few years is “a farce,” she writes in a guest blog for CNBC.

Allowing information to flow freely would improve market efficiency, Roth argues. Doing away with insider trading “will actually lessen the amount of profit to be made from seeking out the information by increasing the number of participants willing to do so,” she says.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

And what about the argument that individual investors will be at a disadvantage? “I can’t think of anything in life where something doesn’t create an advantage or a disadvantage for someone,” Roth writes.

“The markets are inherently unbalanced.”

But most little guys own shares in mutual funds and pension funds, which are big guys in the investment world. So individuals aren’t really at a disadvantage, she says.

One big guy who might now be in trouble is SAC Capital founder Steven Cohen. Federal prosecutors have charged former SAC Capital fund manager Mathew Martoma with insider trading.

He’s charged with getting access to secret drug data that he used to enrich SAC in collaboration with Cohen. But so far Martoma won’t cooperate with prosecutors against his former boss.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

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