For all you Finance geeks, i'm doing a research paper on insider trading, and I need some help.?

Hi, I am supposed to support this argument:

The Securities and Exchange Commission (SEC) should utilize 鈥渋nsider trading鈥?prohibitions to prosecute physicians who provide any information to investment analysts privately which might raise questions about the integrity of clinical research and which could lead one to conclude that a given drug application might not be approved.

How should I support the argument and what are useful resources.

Thanks everyone in advance.

First of all, Martha went to jail for obstruction of justice NOT insider trading. The DOJ did not have any support for its insider trading charge.

The topic of your paper is THE issue with insider trading. The golfing story above is definitely inside information. An analyst calling a physician and asking about anything is technically public information. After all any member of the investing community could make that call. Just because it's the analyst's job to collect information does not mean that it's wrong of him to have more of it than everyone else. Those guys call companies all the time. The issue is obviously on the doctor to know that inside information has to be both material and tradable. The rule exists already. You should just say that what we need is better enforcement.

If I'm an analyst (or just Joe average for that matter) who just happens to be golf buddies with Dr, Somebody who has been noticing that the new drug xyz has a nasty side effect of causing liver failure in the lab rats or the poor people they are testing it on, I now know that this is going to be a flop. News of this sort of thing in the past has been known to push the stock of the drug company down. Now that I have that knowlege BEFORE public release of that information, I can do one (or both for that matter) of 2 things.

A) I can short the stock, that is to sell it even though I dont already own it. When the news is announced, the price per share falls and I buy at the lower price to cover my sale at the higher price. It is not uncommon for drug company prices to move up on optimisim that its going to be good news so the fall can be quite dramatic at times. I could stand to make a lot of money just because I knew one of the Dr's who was part of the study.

B) An even more profitable way to use this information is to buy a really big fat stack of puts (options) on the stock. As the price goes down after the news breaks, my options will go up in value. Because of the leverage of options, I could stand to make well over 1000% on my money if the price moves enough on the next trading day after the press release. It is not uncommon for stocks to go down on bad news at about twice the rate at which they went up.

I knew something that was not available to the general public. I knew it only as a result of my relationship with some one on the inside of the company. I used that information to line my pockets with lots of money. I think thats the definition of insider trading. That would mean that the Dr. and I are going to be joining Martha in jail. By the way I noticed that Martha went to jail but not her broker. I must have missed something in the news. Then again I don't deal in her stock at all or the soap opera that seems to be her life.

Its not uncommon for people to use what they know to futher their income. Its human nature. I'd like to know how your paper comes out Hope my input was of interest and value to you.