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The SEC prosecutes people for trading on privileged information. They also prosecute people for trading linked securities. Everything you wrote was wrong. ht

The SEC prosecutes people for trading on privileged information. They also prosecute people for trading linked securities. Everything you wrote was wrong. http://www.sec.gov/spotlight/insidertrading/cases.shtml http://www.sec.gov/spotlight/insidertrading/cases.shtml You see friends, hackers, recipients of information, and more charged, successfully.

downandout 10y ago
No, he wasn't wrong. You can trade on nonpublic information. From [1]: "The Supreme Court said in 1983 that people who trade on confidential information can be prosecuted only if the insider reaped a benefit from the leak." The convictions in this case were recently overturned: "With Nvidia, the disclosure began with an employee in the company’s finance unit who provided earnings numbers to a friend, who then passed the information to an analyst. The information made its way to Newman and Chiasson through the same circle of analysts involved in the Dell leak....Prosecutors said the information earned $4 million for Newman’s fund and $68 million for Chiasson’s." Of note: "In overturning the convictions, the appeals court said prosecutors needed to show that the person disclosing the information received a clear benefit -- something more than the nurturing of a friendship...The appeals court also said the person being prosecuted had to know about the benefit." In short, the only way to be convicted of insider trading is to directly pay off someone inside the company for the inside information. [1] http://www.bloomberg.com/news/articles/2015-10-05/insider-trading-cases-imperiled-as-top-u-s-court-spurns-appeal http://www.bloomberg.com/news/articles/2015-10-05/insider-tr...
- cloudjacker 10y ago
  SEC settles most of them before they get to court
- vadym909 10y ago
  I know at least once case where the insider (a famous Ohio State professor) didn't profit, but his friends and relatives made $1M on his tip. He still got 5 years in prison. http://www.bizjournals.com/columbus/stories/2005/12/12/daily33.html http://www.bizjournals.com/columbus/stories/2005/12/12/daily...
  - downandout 10y ago
    He and his friends probably took plea agreements. There is nothing that says the feds can't pursue bad cases, and if you don't take it to trial, then you go to prison. But according to the most recent rulings, there are only very limited circumstances where someone can be convicted on insider trading.
    - gherkin0 10y ago
      > There is nothing that says the feds can't pursue bad cases It's unfortunate that there isn't something that says that.
germanier 10y ago
The point is that it's not friends or hackers trading on information they received from someone privileged but someone totally unrelated using information they gathered legally in public without any expectation of privilege. The cases GP mentioned (hiring private investigators observing public places, evaluating satellite imagery) are legal and used every day. Additionally, you can even trade on non-public information as long as the insider does not benefit in any way.
- cloudjacker 10y ago
  Yes thats true, what GP mentioned is fine, I've done it. GP's statements were incorrect.
  - germanier 10y ago
    That's far from "Everything you wrote was wrong".
zekevermillion 10y ago
You may be thinking of tippees. Due to recent cases, it is a lot harder to prosecute them successfully. With that minor caveat, the top commenter is absolutely right.
- cloudjacker 10y ago
  what recent cases?
  - zekevermillion 10y ago
    most significantly, US v. Newman in the 2nd circuit. http://www.scotusblog.com/wp-content/uploads/2015/08/15-137-op-below.pdf http://www.scotusblog.com/wp-content/uploads/2015/08/15-137-...
deleted 10y ago
[deleted]
jrockway 10y ago
You're right that the SEC does like to prosecute people. They are not winning their cases though. Anyway, the NYT did an article about this recently (with respect to Phil Mickelson's insider trading case) http://www.nytimes.com/2016/05/21/sports/golf/in-the-clear-phil-mickelson-can-thank-an-insider-trading-ruling.html http://www.nytimes.com/2016/05/21/sports/golf/in-the-clear-p...

downandout 10y ago

No, he wasn't wrong. You can trade on nonpublic information. From [1]: "The Supreme Court said in 1983 that people who trade on confidential information can be prosecuted only if the insider reaped a benefit from the leak." The convictions in this case were recently overturned: "With Nvidia, the disclosure began with an employee in the company’s finance unit who provided earnings numbers to a friend, who then passed the information to an analyst. The information made its way to Newman and Chiasson through the same circle of analysts involved in the Dell leak....Prosecutors said the information earned $4 million for Newman’s fund and $68 million for Chiasson’s." Of note: "In overturning the convictions, the appeals court said prosecutors needed to show that the person disclosing the information received a clear benefit -- something more than the nurturing of a friendship...The appeals court also said the person being prosecuted had to know about the benefit." In short, the only way to be convicted of insider trading is to directly pay off someone inside the company for the inside information. [1] http://www.bloomberg.com/news/articles/2015-10-05/insider-trading-cases-imperiled-as-top-u-s-court-spurns-appeal http://www.bloomberg.com/news/articles/2015-10-05/insider-tr...

cloudjacker 10y ago
SEC settles most of them before they get to court
vadym909 10y ago
I know at least once case where the insider (a famous Ohio State professor) didn't profit, but his friends and relatives made $1M on his tip. He still got 5 years in prison. http://www.bizjournals.com/columbus/stories/2005/12/12/daily33.html http://www.bizjournals.com/columbus/stories/2005/12/12/daily...
- downandout 10y ago
  He and his friends probably took plea agreements. There is nothing that says the feds can't pursue bad cases, and if you don't take it to trial, then you go to prison. But according to the most recent rulings, there are only very limited circumstances where someone can be convicted on insider trading.
  - gherkin0 10y ago
    > There is nothing that says the feds can't pursue bad cases It's unfortunate that there isn't something that says that.

germanier 10y ago

The point is that it's not friends or hackers trading on information they received from someone privileged but someone totally unrelated using information they gathered legally in public without any expectation of privilege. The cases GP mentioned (hiring private investigators observing public places, evaluating satellite imagery) are legal and used every day. Additionally, you can even trade on non-public information as long as the insider does not benefit in any way.

cloudjacker 10y ago
Yes thats true, what GP mentioned is fine, I've done it. GP's statements were incorrect.
- germanier 10y ago
  That's far from "Everything you wrote was wrong".

zekevermillion 10y ago

You may be thinking of tippees. Due to recent cases, it is a lot harder to prosecute them successfully. With that minor caveat, the top commenter is absolutely right.

cloudjacker 10y ago
what recent cases?
- zekevermillion 10y ago
  most significantly, US v. Newman in the 2nd circuit. http://www.scotusblog.com/wp-content/uploads/2015/08/15-137-op-below.pdf http://www.scotusblog.com/wp-content/uploads/2015/08/15-137-...

deleted 10y ago

[deleted]

jrockway 10y ago

You're right that the SEC does like to prosecute people. They are not winning their cases though. Anyway, the NYT did an article about this recently (with respect to Phil Mickelson's insider trading case) http://www.nytimes.com/2016/05/21/sports/golf/in-the-clear-phil-mickelson-can-thank-an-insider-trading-ruling.html http://www.nytimes.com/2016/05/21/sports/golf/in-the-clear-p...