It s too early to determine exactly what happened at Galleon Group, the multibillion-dollar hedge fund whose embattled co-founder Raj Rajaratnam is at the heart of what the Securities and Exchange Commission is billing as the largest insider trading case in decades.

Without commenting specifically on the case, the details of which are still forthcoming, I believe that the insider trading charges against Rajaratnam are immoral, unjust and wrong.

In today s economic climate, Rajaratnam is an easy target. He s rich, portly and successful the textbook definition of the fat cat we re now conditioned to despise. But like Martha Stewart and Imclone s Samuel Waksal, it s likely the SEC will pursue a witch-hunt against Rajaratnam for a crime that shouldn t actually be a crime at all.

To start, consider that any company Advanced Micro Devices, Sun Microsystems or Google belongs to its shareholders, not to regulators, the government, or the public at large. It s those shareholders who have the right to decide how company information is used.

By forbidding company executives to make use of a firm s own proprietary information, insider trading laws infringe on the right of a firm s owners to run the company as they see fit and capitalize on the value they have created and own. Like the say on pay legislation popular with lawmakers, but not corporations, firms that wished to enact guidelines as to how executives can trade or pass information to others would be free to do so on their own, not by force from the government.

The egalitarian belief behind insider trading prosecutions is that everybody should have exactly the same information, even the folks who haven t worked a day in their lives to gather that knowledge themselves.

So we encourage CEOs to be shareholders yet make it a criminal act for them to trade based on their own hard-earned experience. Instead, they're expected to trade their millions of shares only after Joe Six-Pack has been fully briefed, despite the fact that he s not even a current shareholder of the firm.

Imagine if you knew a brothel or gentleman s club was going to be built next to your home, perhaps thanks to a local contractor or maintenance man hired to install the stripper poles. If insider trading laws were applied to the real estate market, you would not be permitted to sell your home until news about the bordello had been plastered across the front page of the local paper. Would that be fair?

Every time you make a trade, you do so with your own proprietary knowledge that you believe will yield a profit. Insider trading laws effectively require individuals with that knowledge to act against their own interests. That isn t just irrational. It s insane

In a free market, nobody is required to make any particular investment or buy any given stock. If a private investor felt the risk of rampant insider trading was too high within a company, they would be free to not buy its stock. Companies would be able to institute their own policies regarding insider trading and compete with others to craft the most shareholder-friendly policy regarding how insider information is handled.

In reality, it s a company s economic fundamentals that influence its stock, not the fact that the CFO or his golfing buddies bought or sold a few thousand shares. In fact, to the extent insiders make informed decisions that reflect a company s true value, they benefit every investor. SEC-regulated reports are, by definition, late. A stock s price especially when objectively priced by those in the know is the most accurate possible indicator of a company s health or its potential.

It s also worth noting that the illegal trading Galleon is accused of committing resulted in losses for the firm, according to a report in The New York Times. If the insider info they were using was lucrative enough to harm other investors, it seems rather bewildering that the firm would lose money trading on it.

Today, we instinctively perceive insider trading as a deeply criminal act, but it was only in the 1960s that the SEC began to prosecute cases at all, using the antifraud statutes of securities laws passed in the wake of the stock market crash some 30 years earlier.

Japan didn t even have laws against insider trading until the late 1980s, and even now, charges are rarely pursued. There, it s culturally accepted that knowledgeable investors should be able to profit off that knowledge. Why not here?

In the United States, we have no sympathy for those accused of this ambiguous and subjective crime because, in our current culture, executives and other insiders are presumed guilty simply because of their pursuit of profit and their privileged, albeit earned, positions.

We live in a world in which everybody s knowledge and achievement isn t the same. Any valuable information gleaned by those who own and are closely involved with a company is a legitimate benefit of creating value in a free marketplace.

The SEC s perplexing and unjust persecution makes acting on that knowledge a crime.