The SEC’s crackdown on efficient markets

Cite this Article
Larry Ribstein, The SEC’s crackdown on efficient markets, Truth on the Market (November 24, 2010),

Holman Jenkins has some thoughts on what he calls the insanity of the rumored government initiative against insider trading:

Society is served * * * when investors and management get the best possible feedback on what products and services and business models are most demanded by the public.

The SEC has a different view. * * * In the SEC’s ideal world, any information originating inside a company will be reflected in stock prices only after the company has publicly announced it to the world’s investors simultaneously. * * *

More ridiculous is the claimed motive: because it’s “fair” to small investors. * * * What really improves the small investor’s confidence in the market’s fairness is when he buys a stock, is blindsided by some corporate announcement, and yet notices the stock barely moves anyway thanks to the sharpies who made sure the information was already in the price.

The SEC touts on every possible occasion its political bona fides with blather about its devotion to small investors. But if the agency really had our interests at heart, it would preach daily the unwisdom of most us ever buying an individual stock. We should be free-riding on the efforts of the people the FBI is trying to criminalize.