Suppose an inside scoop of official secrets gives some market players an unfair advantage—is that a good reason to muzzle the media?

People who are concerned about runaway secrecy and who cheer when the media break important stories in defiance of government edict may still find this particular affair worrisome.

Suppose the official secrets that are illegally leaked are published in an exclusive newsletter for a narrow sliver of the public that pays a lot of money for them. What’s more, the secrets don’t so much enlighten the broad public—which doesn’t see them—as they enable those lucky customers to cash in by making smarter investments than non-subscribers do.

Now, by and large, even though the government prosecutes leakers vigorously (especially in the national security realm) and tries its best to imprison them, it never goes after the outfits that publish the blown secrets. By custom—if not by statutory or constitutional entitlement, since this immunity has never been tested in court—the media get a pass.

But should the newsletter that brokered the illegal leak to its clients, who sought to profit from it financially, still benefit from the restraint that the U.S. government usually shows to news organizations that run classified material?

So to the case at hand, which involves Medley Global Advisors, owned by the London-based Financial Times. Medley describes itself as “the leading global provider of macro policy intelligence for the world’s top hedge funds, institutional investors, and asset managers. “

In October 2012 a Medley newsletter published delectable, secret information about forthcoming actions to be taken by a pivotal committee of the Federal Reserve, the country’s central bank.

The Fed is notoriously protective of its deliberations, since they routinely move markets worldwide, and is mindful of the immense advantage that knowledge of coming decisions can give to those in the know.

In this instance, according to an account from Pro Publica, Medley reported that the Fed’s Open Markets Committee had decided in September to extend its stimulus program, and would buy $45 billion per month in Treasury bonds and mortgage-backed securities for some months to come.

That was big news, and the day after Medley’s account came out the Fed, as scheduled, released minutes of the committee meeting, which confirmed the report. That caused bond prices to fall and yields to rise. Advance knowledge of what the minutes would say was, it’s safe to assume, extremely advantageous.

Fed officials launched an internal probe, and by last month the Commodity Futures Trading Commission, a regulatory agency, had started an insider-trading investigation while federal prosecutors in Manhattan were conducting a probe of their own.

In its defense, The Wall Street Journal reported, Medley suggested it has the same journalistic license of any news outfit, and “reserves complete editorial freedom in its newsletters, an integral principal for any newsgathering organization.”

That’s a nettlesome claim for the Obama administration to hear, since this Justice Department has compiled an unparalleled record of reprisals against unauthorized media leaks of state secrets—no fewer than seven Espionage Act prosecutions, with the leakers facing many years behind bars.

To placate critics in the media, then-Attorney General Eric Holder had tightened up rules governing his prosecutors, forcing them to seek higher-level approvals before going after reporters to pressure them into giving up their sources.

Still, The Journal reported, at least three other insider-trading investigations are underway that involve policy research firms that allegedly reported government secrets, to the benefit of securities traders.

So what gives? Is there any good reason to deny a tiny newsletter published for the well-heeled the same expressive freedom to gather and distribute truthful information—even if it’s classified—that a mighty news organization serving a mass audience would expect?

Of course not, if you put it like that.

But now, let’s frame the question differently:

Can clever investors, in effect, commission private sleuths to violate rules written to foster some measure of fairness and equality of access to pivotal information in the financial marketplace? And can those sleuths claim that they’re simply journalists, that their disclosures do nothing more than serve the cause of public illumination, that any gain their clients illicitly derive from them is beside the point?

There’s nothing easy about those questions, certainly not at a time when the news media continue to flail about, searching for successful business models—one of which has long been the hyper-specialized, micro-circulation, high-priced, impeccably-sourced “intelligence” purveyor. The appeal of the traditional newsletter has always been its exclusivity, its offer of sophisticated insight and, yes, of insider information that it whispers only to its clients.

Of course, there’s something seriously disturbing about the unfair advantage that a minuscule number of lucky subscribers to Medley’s newsletter may have derived from the pluck and enterprise of its reporter. But if so, maybe the solution is for regulators to declare some “publications” to be insufficiently “public,” and forbid the investment community to act on the information they put out precisely because it’s too closely-held, and tilts the playing field in ways that are no less wrong than a telephoned tip from a company insider.

That may be a fanciful idea, but my understanding of insider-trading rules is that they seek not to restrict the flow of information—an impossibility anyway—but to restrain the uses to which that information is put.

Fair enough. Here again, muzzling the media seems a much less appealing option than instructing market players that financial reporting is meant to lubricate the system, not corrupt it, and in some instances, the very quality of the information they’re getting confers a strict obligation not to act on it.

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