Frank Partnoy, a law professor at USD and author of "Infectious Greed", an excellent book on the underlying causes of the financial collapse, comments on the Galleon case. In "The real insider tip from the Galleon verdict" he argues that insider trading may come back stronger from this setback.

If you do the maths, given the amount of insider trading, the chances of doing prison time are roughly the same as getting bitten by a great white shark while surfing off the coast of my home town, San Diego.

There are rare shark attacks and many people become very afraid after them, just as some traders are now fearful after this high-profile conviction. However, that fear is irrational, based on the salience of an unusual event.

The case will be used as a manual on avoiding prosecution or conviction, Partnoy predicts.

If you talk on the phone, be cryptic... Don't buy immediately after you are tipped... Most important, keep a contemporaneous record of reasons to buy other than the tip.

And so on.

The real problem is that it still isn't clear what insider trading is. Issues of "materiality" and "breach of duty" (not necessarily by the accused) worsen the confusion. This lack of clarity cuts two ways:

Prosecutors might hope vagueness will deter, but instead it erodes respect for the law...