Victimless Crime?

The one thing missing from this whole Goodale scandal is the victims. Clearly there was someone that broke the law here, and it seems to have come from the Finance Minister's office, but I think the reason there isn't all that much outrage is that no one really gets hurt from insider trading. When insider trading happens there is no real loser, even though there is a winner.

Let's say a stock is going to go way up once information goes public (everything works in reverse if stock will go down). On an efficient market, such as the TSX, there are always buyers and sellers at the given market price. So when the insider decides to buy extra shares that he knows will soon go up, the seller actually is doing what they would be doing regardless. Again, the seller would have sold their shares regardless of the insider. So what impact did the insider have? Well he actually, very slightly, rose the current market value of the stock. As there is more buyers than sellers at the market price the market price rises. The market price is the equilibrium price that is arrived at by balancing the buyers and sellers that have the same knowledge base (in theory). So when the insider has this advanced knowledge, there is nothing the stock can do but go up since there is an extra buyer. I understand everyone hates the ideas of these powerful insider traders stealing money from the common folk, but I just don't agree that it really harms them. Any crime where you cannot mention a victim should not be a crime, no exceptions.

So now that I argued why Martha Stewart really didn't do anything all that, I will go on to explain why Ralph Goodale did. There is a big difference between a private citizen knowing something about a company or a government official knowing how new legislation would change stocks. That private citizen would have found this new information from a completely legitimate source, just one that not enough people (deemed by insider trading laws) also had access to. With Goodale, he made the information himself, he didn't get this information from talking with anyone or hiring a private research company, he is in government and chose this new legislation. This is a vastly different situation. He took advantage of his role as the Finance Minister to affect his personal situation. By only informing a select group of people about the upcoming annoucement there was an opportunity cost to every Canadian that weren't in Goodale's inner circle. There was no productivity increase in any of these companies whose shares went up, it was purely that a more beneficial tax system for them raised their value. With regular insider trading, any new information is heard by many different people at different times before it is deemed that it is public knowledge, but in this situation Goodale created the gain for the companies by his role as the Finance Minister, and then abused his power by telling only a select group of people before the rest of the country. Shame on you Mr. Goodale. This announcement should have been made after the close of trading, as it was, but the leak was a pure abuse of power that the Canadian public trusted him to have.