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The court and inside trading

THE decision Monday by the Supreme Court of the United States to uphold the fraud convictions of R. Foster Winans and two others has been hailed as a green light to proceed with the federal crackdown on insider trading. But the 4-4 split decision on the inside-trading conviction - which lets the conviction stand but sets no precedent - should be seen as a yellow caution light.

The United States needs a clear statutory definition of inside trading, and Congress should act swiftly to provide one. So far, authorities have held that such a definition would merely suggest new loopholes for the unscrupulous to wriggle through.

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Well, legislation can always be changed. A loophole revealed can be a loophole closed. The sharpies are always looking for an edge. Over time, though, considerable protections for investors have developed.

If a statutory definition of inside trading renders some cases impossible to prosecute, it will make others more clear cut. Federal prosecutors will not lack work.

The United States, and certainly the business community, is a litigious, legal-minded society. It is geared toward explicit statements, particularly in financial matters, rather than implicit consensus as to what is or is not ``done.'' Moreover, in these matters, there really are shades of gray, areas where reasonable people may differ. The reams of fine print in the federal statute books do not have the same weight as the stone tablets brought down from Sinai.

And so it is not good enough to leave it to individuals to make their own decisions about what their fiduciary or other professional obligations are.

There is always room for individual judgment, opportunities to take the better course, rather than the merely adequate or expedient way - even in situations no one else will ever know about. And certainly Wall Street employers can do much to communicate to their staffs a respect for the spirit and the letter of the law.

Mr. Winans, a former Wall Street Journal reporter who traded on information obtained while writing his ``Heard on the Street'' column, was clearly guilty of a grievous lapse of journalistic ethics.

But an explicit definition of inside trading will be a protection for all involved - regulators, investors, and the financial community.

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