WITH THE Winans decision the Supreme Court has greatly, but imprecisely, widened the reach of the laws against insider trading. Or seems to have widened them. It's best to be cautious, for the decision is both watery in its logic and confused in its disposition. The law here, as legal scholars say with a sigh, is in a state of flux.
What R. Foster Winans did was reprehensible, but the question was whether it constituted a crime. The history of the case through trial court, appellate court and now the Supreme Court suggested that Mr. Winans' game enraged a succession of judges, inducing them to stretch the law in ways that it had not been defined before. Mr. Winans wrote a stock market column for The Wall Street Journal, and the column affected the prices of stocks. He tipped off a couple of brokers about forthcoming columns and they all profited handsomely -- until someone in the brokerage began to spot the pattern.
Before this decision, insider information meant secret information coming from high levels inside a corporation. But Mr. Winans was a newspaper reporter -- the quintessential outsider, dealing only in information given him openly in the course of his reporting. The stock of the company that employed him was not involved. No matter, said the lower courts. They held that the contents of the columns was the property of The Wall Street Journal, and he was stealing that property from the paper when he gave leaks to the brokers. That, the lower courts said, constitutes securities fraud and -- because the Journal uses the wires and the mails to publish and distribute the paper -- it's also wire and mail fraud.
The Supreme Court split 4 to 4, for reasons that it did not explain, on the securities fraud. But it unanimously upheld the charge of wire and mail fraud. With that, Mr. Winans will go to jail.
One result of this decision is to bring the federal government, and particularly the Securities and Exchange Commission, closer to the internal operations of the news business. That's why the Reporters Committee for Freedom of the Press and eight other news organizations filed briefs as friends of the court opposing this criminal conviction. Nobody defends what Mr. Winans did -- a clear and gross betrayal of his paper and his trade. But in upholding this conviction, the Supreme Court has opened large questions about the kinds of information that the financial fraud laws can reach.
There is now the possibility that the government will be tempted to expand the regulation of financial news reporting, and use the criminal statutes to enforce its idea of propriety. Inside information now apparently includes outside information. Protecting the financial markets from manipulation is important. But the confusion is deepening, and it's time for Congress to strike a more durable, and more intelligible, balance.