Friday, March 25, 2005

Soros Guilty of Insider Trading

Bloomberg reports that a French appeals court upheld the conviction of George Soros on insider trading charges. Link.
Billionaire investor George Soros was found guilty of insider trading by a French appeals court, upholding a 2002 conviction in a case that he's been fighting for 16 years.

The Paris appeals court ruled that Soros's 1988 purchase of Societe Generale SA shares with the knowledge that the bank might be a takeover target broke French insider trading laws. The court today confirmed an earlier order asking Soros to pay back his 2.2 million euros ($2.9 million) in gains. Prosecutors didn't ask for punitive damages and Soros faces no other penalties or restrictions in France.

I have no knowledge of the case itself, so I will not comment on it, but I have some observations on the sentence. If an investor with inside information gets to keep the money if he is not caught or convicted and only has to return his profit if he is caught and convicted, this is no deterrence. He cannot lose. The worse that can happen is a break-even. It is so rare that someone trading on inside information gets caught and convicted, that the penalty should far exceed the profit.

That seems especially true in this case. The $2.9 million fine is pocket change to George Soros. He gave nearly ten times that amount to 527s trying to defeat President Bush. Isn't a punishment supposed to make the felon feel punished?


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