Willie Sutton famously opined that he robbed banks because that was where the money was. His quip came to mind when I read Justin Fox's interesting critique of the SAC Capital indictment:
Five years after a financial crisis that, as best anybody can tell, had almost nothing to do with insider trading by hedge funds, the two biggest post-crisis criminal crackdowns on the financial sector in the U.S. have centered on ... insider trading by hedge funds. ...
... Bharara and his predecessors (Rudy Giuliani held the same job in the late 1980s) have taken on insider trading cases because they can win them. Thanks to a half century of SEC opinions and court rulings, insider trading is much easier to prosecute than other dodgy financial behavior. ...
The ban on insider trading dates to an era when the stock market was the biggest financial show in town, and small investors still controlled a big percentage of it. Now institutions dominate stock trading, and publicly traded stocks are a relatively small part of a burgeoning financial universe of private equity, debt, commodities, derivatives, and more. Yet most government investigative and prosecutorial energy seems to remain focused on insider trading in stocks — because that's where cases can be won.
Easy convictions and plea deals are to prosecutors what money is to bank robbers, so it makes sense that they'd focus on insider trading as opposed to more important stuff.
Thanks also to Fox for his shout out:
I will not claim to have read all or even most of the contributions to these volumes (law professors write long), but just dipping into them is an educational if bewildering experience. (The Langevoort article cited above is from the Columbia Business Law Review; my brief history of insider trading law is partly cribbed from Bainbridge's introduction to the Handbook.) The main lesson I learned is that the case against insider trading is much less about specific harms than a belief that it's bad for financial markets in general.
Go read the whole thing. It's a great analysis.