but I don’t think there is any moral problem with insider trading. It is not fraud or stealing. It is just a matter of fairness.
You seem to be only considering the purchase of shares as opposed to the sale of them. Also, individuals in a position requiring fiduciary responsibility should not be permitted personal motive to intervene in any manner, it's destabilizing.
A wide open, no holds barred insider trading regime would be endless boom and bust with a very few profiting enormously and the market at large being completely wrecked. That is not in the interest of business or the society at large.
Do you see any problem with Chertoff being closely associated with the manufacturer of these controversial TSA security scanners? That represents a conflict of interest, and it is insider trading of a sort. It's not just a matter of "fairness," it's immoral precisely because it's fraudulent, and tantamount to stealing. It's malinvestment perpetrated for the individual gain of a few, foisted upon the entirety of the country, at a great cost in money, time and individual liberty.
RegulatorCountry is on to something.
Consider this scenerio. You are the vice-president of development of a large corporation. And it’s decision time. You have to decide if a new product is ready for market. In your opinion, the product is not ready.
Your duty is to report that more time is needed before releasing the product.
Now suppose that there were no insider trading laws. If you were less than ethical, you could buy up a ton of your company shares, then report the product as ready for market.
When the product comes out, the stock price rises, and you sell.
Now, who gets hurt by this insider trading? Everyone, except the insider trader. When the product fails, the company suffers. The long-time shareholders suffer. And folks who bought stock on the strength of the new product suffer.
There are many variations on this scenerio, with pretty much the same result.
It is more than just fairness. If capital markets are seen to be corrupt then capital markets will stop serving their purposes: 1.) allowing investors to defer the right of present consumption into the future (saving for education, retirement, buying a house, a rainy day) by investing in capital goods that increase future productivity, and 2.) increasing the wealth of the country by encouraging the investment in captial goods.
The misallocation of resources by our capital markets (into e.g. derivatives, condo and retail mall development rather then wealth increasing investments) has already run our country into the ground, and now we discover that these same folks were mostly trading for their own accounts?