Insider Trading Is Like A Dog Named "Stay"

Insider trading cases remind me of the following joke attributed to stand-up comic Steven Wright:

I bought a dog the other day. I named him Stay. It's fun to call him. "Come here, Stay! Come here, Stay!" He went insane.

Regulation of insider trading is a lot like Wright's unfortunate pet.  Securities regulators encourage investors to seek out information.  The SEC, for example, solemnly advises seniors that "Savvy investors take the time to do their own independent research and talk to friends and family first before investing".  At the same time, the government has come down hard on those who talk to family members and friends before investing.  Just ask Mr. Bassam Salman.  He was convicted for insider trading after talking to his brother-in-law who in turn talked to his brother.  Salman v. U.S., 137 S.Ct. 420 (2016).  See Why Bassam Salman Should Not Have Been Convicted.

A diligent investor who ferrets out information about issuers and makes good investment decisions based on that information is rewarded for his efforts.  The investor, moreover, benefits other investors because his trading activities transmit information to the market.  However, an investor who gets the information from the wrong person or in the wrong way is punished for his efforts.