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Three Equifax Managers Sold Stock Before Cyber Hack Was Revealed

650 points by QUFB 9y ago

dingdongding 9y ago
Hello insider trading !
tdeck 9y ago
Aren't senior executives legally required to submit their trading plans well in advance of any stock sale? That certainly seemed to be the case at my last employer.
- QUFB 9y ago
  From the article: > None of the filings lists the transactions as being part of 10b5-1 pre-scheduled trading plans.
  - loeg 9y ago
    That doesn't answer the question. We all read that the trades were not planned in advance. The question is, is that by definition illegal? Or were the trades only illegal because they had insider knowledge that the price was about to drop?
    - khuey 9y ago
      If they had access to material non-public information and then decided to trade it would be illegal. Trades that are not planned in advance are not illegal in and of themselves.
      - loeg 9y ago
        Do you think executives ever do not have access to material non-public information?
- all_blue_chucks 9y ago
  No, they are not required to do that. Many choose to do that to avoid the appearance of insider trading, though.
- icelancer 9y ago
  No, it's an affirmative defense to do so, but not required. There are a lot of reasons to sell outside of the scheduled plan. Many executives will set up minimal scheduled selling plans and liquidate more as diversification becomes necessary, or key purchases in their life. Documentation is everything.
stygiansonic 9y ago
FTA: "None of the filings lists the transactions as being part of 10b5-1 pre-scheduled trading plans." Anyone with more knowledge: How normal is this sort of behaviour?
- ringaroundthetx 9y ago
  Pretty normal. Their lawyers likely said that as long as they reported in (via Form 3 and Form 4) then it would be complaint enough. So this was still transparency, and its just fodder for reporters to debate about, because without the Form 3 and Form 4 regulation, you would never know. Cost benefit analysis.
  - stygiansonic 9y ago
    So, does this mean just the transparency via regulatory filings is enough to absolve them of any legal liability?
    - jdmichal 9y ago
      It means that someone from the SEC should probably be looking into the trades. It would take a court to decide any legal liability, and charges would be the result of such SEC action. Having not reported the transactions in the first place would have likely made the sales less defensible -- good ol' "why were they hiding if they aren't guilty?"
      - icantdrive55 9y ago
        It looks like this is the way to get around SEC laws. 1. Have a large stock/hedgefund/whatever company. Kinda like Steve Cohen at SAC. 2. Hire hungry employees to take the risk of getting/profiting from Insider Information. (Yes--there are a thousands of Series 7 sociopaths that will do anything to get ahead--including spending a few years at the locked up federal Resort. "Just make money. Happy boss happy life! Plus--how do I keep the out of my league Professional Shopper happy? Really dude?" 3. As long as the head honcho doesn't know exactly where the sociopath got the stock tip, he can claim plausible deniability on his winning wad. It helps to have an army of good lawyers, and very deep pockets. 4. Pay some expected civil penalties, but stay clear of Criminal Conviction. Keep that privilege to steal. That's what's important. 5. Keep your license, and go back to the game of exploiting a rigged system. 6. I'm talking about guys like Steve Cohen. (In my mind, it looks like as long as you can't be directly tied to the insider tip; you Win! Yea--for the boys! Yea--for having money to buy your right to win!). 7. In all honestly, the only real money my deceased father made on the stock market was over a tip at Thanksgiving giving after his daughter's father and in-law got drunk and told him to invest in his company. This was twenty years ago. My father was a vocal critic of anyone who cheated the system. He stopped with his chest beating holier than thou speaches after that trade. (I don't even think my dad saw it as insider trading that night. It was a few months later it hit him. I knew, but I knew my father desperately needed some viable stock tips. Tips that most guys throw around--especially the successful Traders. https://www.ft.com/content/efda2ca2-ec69-11e6-930f-061b01e23655 https://www.ft.com/content/efda2ca2-ec69-11e6-930f-061b01e23...
korethr 9y ago
So, does this count as insider trading? My intuition says 'yes'. But my intuition about a thing and what the law says don't always match.
- jdmichal 9y ago
  Insider trading is any trading performed using non-public knowledge. Theoretically even a pre-scheduled trade could be insider trading, if it relied on non-public knowledge which remained non-public until the time the trade executes. Of course, that's a pretty hard scenario to concoct, so generally pre-scheduled trades 3+ months out are considered safe for even high-level insiders. Not to mention all the extraneous movement that might happen within that same time period that could very well nullify any knowledge advantage.
  - thephyber 9y ago
    Interesting fact: commodities were not subject to such a law in the USA until Frank-Dodd Act. The rule was named for Eddy Murphy, who played a commodities trader in Trading Places[1]. The reasoning, as I heard it, was that all farmers who hedged their own crops with commodities trading, had some amount of insider knowledge just by looking at their own farm/crop/weather. Stealing a data report before it is publicly announced, however, seems like it would violate some laws. Paying to access reports early seems to be a lucrative offering of some of the data providers. [1] https://en.wikipedia.org/wiki/Trading_Places#Legacy https://en.wikipedia.org/wiki/Trading_Places#Legacy
    - toomuchtodo 9y ago
      If you haven't seen Trading Places, please please please make the time to watch it. Its both educating and entertaining!
  - airza 9y ago
    If all trades based on non-public knowledge were insider trading, the financial analysis industry would not exist
kin 9y ago
This is all kinds of unethical.
- RawData 9y ago
  Nope, this is more likely all kinds of illegal!
dahdum 9y ago
John Gamble (CFO) has been dumping heavily since May 20th (http://www.reuters.com/finance/stocks/insider-trading/EFX?symbol=&name=&pn=1&sortDir=&sortBy= http://www.reuters.com/finance/stocks/insider-trading/EFX?sy...).
- tunetine 9y ago
  Am I the only one surprised a CFO is making this amount of money?
  - toephu2 9y ago
    Yes. You must be a new college grad? A CFO of a $17B company making $3m/year[1] is normal. [1] http://www.reuters.com/finance/stocks/officer-profile/EFX/2507742 http://www.reuters.com/finance/stocks/officer-profile/EFX/25...
mankash666 9y ago
Credit reporting agencies are the cancer of the modern economy. They are rife with inaccuracies, and on top of that, highly vulnerable to hacking , as software engineering is just a cost for them, not their focus. Their entire function needs to move to the blockchain. Their only value is that of a distributed, trust less ledger, and they charge horrible fees and sit in the middle for doing that terribly
- redm 9y ago
  Perhaps I am misunderstanding what you're proposing, but If you moved all credit info to a blockchain, then everyone's info would be public. That seems to be opposite of the goal, so how is that better? Also, the credit agencies, for better or worse, weigh the different factors in a credit profile, to provide an approximation of an individual's credit worthiness. This information from a credit bureau is solicited by many lenders who are providing the credit.
  - bigdubs 9y ago
    The point is to have verifiable identity that is tied to something more secure than a (not random) 9 digit [0-9] string and an address. Your name is on the chain, the assertion you're you is done with your private key.
    - wsxcde 9y ago
      And are we expecting normal people to do key management?
      - bigdubs 9y ago
        Works fine in estonia.
      - ISL 9y ago
        I'm a normal person. My first attempt at key management was an utter failure, accidentally broadcasting a private key instead of the public one.
stuaxo 9y ago
That reminds me I need to update my address on Equifax. I found out it was wrong after being refused to be allowed to buy a mobile data plan (even though I had all the cash it counts as a credit issue). After 5-6 phone calls to get the address added to their system, I never did the final one a few days later to get them to update me once it was in their system. Absolute bunch of arses.
- thephyber 9y ago
  It's amazing how they make it difficult to give them more information. Granted, you aren't paying them directly, but you are effectively making their business more valuable by linking more accurate data to their profile of you.
to_bpr 9y ago
If this is deemed to be illegal then so be it, may the law deal with them. If not, I think it'd be hard to say that in the same situation I wouldn't do the same.
mnm1 9y ago
The only reasonable punishment for this is decades in jail. If they can't put these assholes in jail for running the credit check companies themselves, at least convict them for insider trading. These businesses should not exist to being with. I'm not sure what the penalty for insider trading is, but if the prosecutors a little creative, they could convict for each share sold. That should keep these scumbags in jail for the rest of their lives. Oops, I must be dreaming again ...
- thephyber 9y ago
  > If they can't put these assholes in jail for running the credit check companies themselves Who is "they"? You realize Congress has effectively cemented the place of the big three credit bureaus in the daily life of all Americans, right?
ChuckMcM 9y ago
That seems incredibly stupid. The CFO especially would be hard pressed to convince anyone either that he 'didn't know' there had been a breach or define himself as not an 'insider.' If the facts are as reported these folks are in a world of hurt.
- thephyber 9y ago
  It perhaps was stupid, but you forget that the burden of proof is the other way around. I was under the impression C-suites and directors had to file with the SEC in order to sell stock. I'd wager they did and that's how Bloomberg found out about it.
  - scottlamb 9y ago
    The burden of proof for criminal charges is the other way around. I can think of a few ways he could "in a world of hurt" without being found guilty of criminal charges; in fact without any formal burden of proof: * A trial or even just discovery for a trial and having to pay lawyers more than he gained from selling this stock. * Angry shareholders or even board members could demand consequences such as docked pay or termination. * Negative media attention such as this article.
deleted 9y ago
[deleted]
21 9y ago
So one guy sold 1 mil of stock, the stock dropped 6%, so he avoided a 60k loss. Let's say he expected a 20% drop, and he saved 200k. If a were a millionaire, I wouldn't risk prison for 200k. Even the litigation to avoid prison could cost 100k. And this is the kind of thing you know all angles will be looked into (it took a news agency a few hours to unearth this). If he did it (insider trading), he is very stupid.
- eigenvalue 9y ago
  The stock is going to drop a lot more than 6%!
  - 21 9y ago
    If you are so sure, short it now and make a lot of money.
    - ceejayoz 9y ago
      Markets are closed, but it's down 13% in after-market trading now.
      - drewmol 9y ago
        This is not financial advise: I remember a few commentors on HN recently saying they have made large gains by buying stock of companies after the news of cyber security breaches significantly reduced the share value, then waiting for the dust to settle(reaction-news-cycle to complete) and the price to rise again.
        khuey 9y ago
        For the benefit of those reading: given that this may very well be the worst breach ever by far, and is likely to attract significant attention from government regulators and prosecutors, this is likely a particularly unwise time to begin attempting this strategy.
carbocation 9y ago
Out of curiosity, how would I go about looking this up?
- thephyber 9y ago
  Someone else in this thread linked to: http://google.brand.edgar-online.com/?sym=EFX http://google.brand.edgar-online.com/?sym=EFX
konceptz 9y ago
So the company stated that they (3 of them) did not know about the breach. I'm interested in what it takes to begin an investigation?
- kevin_thibedeau 9y ago
  https://denebleo.sec.gov/TCRExternal/index.xhtml https://denebleo.sec.gov/TCRExternal/index.xhtml
torbjorn 9y ago
If they wanted to do insider trading why would they sell only a small portion of their shares?
rshm 9y ago
Is it possible or are there free data sources if an average person wants to dig into tradings of Jul 27, two day before official date of discovery.
- jannes 9y ago
  No, that's not possible. These trades are only public because there is regulation that mandates Equifax to file trades by their employees above a certain level. Statement of Changes in Beneficial Ownership: https://en.wikipedia.org/wiki/Form_4 https://en.wikipedia.org/wiki/Form_4 Otherwise you have this trading information spread across thousands of brokers (and it doesn't become public)
cprayingmantis 9y ago
Equifax was down for a long time the other day. I should've treated that as a signal to short the stock...
coffeemug 9y ago
How many Equifax managers are there trading? Could this be law of large numbers?
wdewind 9y ago
Wouldn't they have scheduled these trades months in advance like most employees of public companies with insider trading policies?
anigbrowl 9y ago
Smart guys, they can get a presidential pardon. Great guys, the best.

650 points by QUFB 9y ago

Hello insider trading !

Aren't senior executives legally required to submit their trading plans well in advance of any stock sale? That certainly seemed to be the case at my last employer.

QUFB 9y ago
From the article: > None of the filings lists the transactions as being part of 10b5-1 pre-scheduled trading plans.
- loeg 9y ago
  That doesn't answer the question. We all read that the trades were not planned in advance. The question is, is that by definition illegal? Or were the trades only illegal because they had insider knowledge that the price was about to drop?
  - khuey 9y ago
    If they had access to material non-public information and then decided to trade it would be illegal. Trades that are not planned in advance are not illegal in and of themselves.
    - loeg 9y ago
      Do you think executives ever do not have access to material non-public information?
all_blue_chucks 9y ago
No, they are not required to do that. Many choose to do that to avoid the appearance of insider trading, though.
icelancer 9y ago
No, it's an affirmative defense to do so, but not required. There are a lot of reasons to sell outside of the scheduled plan. Many executives will set up minimal scheduled selling plans and liquidate more as diversification becomes necessary, or key purchases in their life. Documentation is everything.

stygiansonic 9y ago

FTA: "None of the filings lists the transactions as being part of 10b5-1 pre-scheduled trading plans." Anyone with more knowledge: How normal is this sort of behaviour?

ringaroundthetx 9y ago
Pretty normal. Their lawyers likely said that as long as they reported in (via Form 3 and Form 4) then it would be complaint enough. So this was still transparency, and its just fodder for reporters to debate about, because without the Form 3 and Form 4 regulation, you would never know. Cost benefit analysis.
- stygiansonic 9y ago
  So, does this mean just the transparency via regulatory filings is enough to absolve them of any legal liability?
  - jdmichal 9y ago
    It means that someone from the SEC should probably be looking into the trades. It would take a court to decide any legal liability, and charges would be the result of such SEC action. Having not reported the transactions in the first place would have likely made the sales less defensible -- good ol' "why were they hiding if they aren't guilty?"
    - icantdrive55 9y ago
      It looks like this is the way to get around SEC laws. 1. Have a large stock/hedgefund/whatever company. Kinda like Steve Cohen at SAC. 2. Hire hungry employees to take the risk of getting/profiting from Insider Information. (Yes--there are a thousands of Series 7 sociopaths that will do anything to get ahead--including spending a few years at the locked up federal Resort. "Just make money. Happy boss happy life! Plus--how do I keep the out of my league Professional Shopper happy? Really dude?" 3. As long as the head honcho doesn't know exactly where the sociopath got the stock tip, he can claim plausible deniability on his winning wad. It helps to have an army of good lawyers, and very deep pockets. 4. Pay some expected civil penalties, but stay clear of Criminal Conviction. Keep that privilege to steal. That's what's important. 5. Keep your license, and go back to the game of exploiting a rigged system. 6. I'm talking about guys like Steve Cohen. (In my mind, it looks like as long as you can't be directly tied to the insider tip; you Win! Yea--for the boys! Yea--for having money to buy your right to win!). 7. In all honestly, the only real money my deceased father made on the stock market was over a tip at Thanksgiving giving after his daughter's father and in-law got drunk and told him to invest in his company. This was twenty years ago. My father was a vocal critic of anyone who cheated the system. He stopped with his chest beating holier than thou speaches after that trade. (I don't even think my dad saw it as insider trading that night. It was a few months later it hit him. I knew, but I knew my father desperately needed some viable stock tips. Tips that most guys throw around--especially the successful Traders. https://www.ft.com/content/efda2ca2-ec69-11e6-930f-061b01e23655 https://www.ft.com/content/efda2ca2-ec69-11e6-930f-061b01e23...

korethr 9y ago

So, does this count as insider trading? My intuition says 'yes'. But my intuition about a thing and what the law says don't always match.

jdmichal 9y ago
Insider trading is any trading performed using non-public knowledge. Theoretically even a pre-scheduled trade could be insider trading, if it relied on non-public knowledge which remained non-public until the time the trade executes. Of course, that's a pretty hard scenario to concoct, so generally pre-scheduled trades 3+ months out are considered safe for even high-level insiders. Not to mention all the extraneous movement that might happen within that same time period that could very well nullify any knowledge advantage.
- thephyber 9y ago
  Interesting fact: commodities were not subject to such a law in the USA until Frank-Dodd Act. The rule was named for Eddy Murphy, who played a commodities trader in Trading Places[1]. The reasoning, as I heard it, was that all farmers who hedged their own crops with commodities trading, had some amount of insider knowledge just by looking at their own farm/crop/weather. Stealing a data report before it is publicly announced, however, seems like it would violate some laws. Paying to access reports early seems to be a lucrative offering of some of the data providers. [1] https://en.wikipedia.org/wiki/Trading_Places#Legacy https://en.wikipedia.org/wiki/Trading_Places#Legacy
  - toomuchtodo 9y ago
    If you haven't seen Trading Places, please please please make the time to watch it. Its both educating and entertaining!
- airza 9y ago
  If all trades based on non-public knowledge were insider trading, the financial analysis industry would not exist

kin 9y ago

This is all kinds of unethical.

RawData 9y ago
Nope, this is more likely all kinds of illegal!

dahdum 9y ago

John Gamble (CFO) has been dumping heavily since May 20th (http://www.reuters.com/finance/stocks/insider-trading/EFX?symbol=&name=&pn=1&sortDir=&sortBy= http://www.reuters.com/finance/stocks/insider-trading/EFX?sy...).

tunetine 9y ago
Am I the only one surprised a CFO is making this amount of money?
- toephu2 9y ago
  Yes. You must be a new college grad? A CFO of a $17B company making $3m/year[1] is normal. [1] http://www.reuters.com/finance/stocks/officer-profile/EFX/2507742 http://www.reuters.com/finance/stocks/officer-profile/EFX/25...

mankash666 9y ago

Credit reporting agencies are the cancer of the modern economy. They are rife with inaccuracies, and on top of that, highly vulnerable to hacking , as software engineering is just a cost for them, not their focus. Their entire function needs to move to the blockchain. Their only value is that of a distributed, trust less ledger, and they charge horrible fees and sit in the middle for doing that terribly

redm 9y ago
Perhaps I am misunderstanding what you're proposing, but If you moved all credit info to a blockchain, then everyone's info would be public. That seems to be opposite of the goal, so how is that better? Also, the credit agencies, for better or worse, weigh the different factors in a credit profile, to provide an approximation of an individual's credit worthiness. This information from a credit bureau is solicited by many lenders who are providing the credit.
- bigdubs 9y ago
  The point is to have verifiable identity that is tied to something more secure than a (not random) 9 digit [0-9] string and an address. Your name is on the chain, the assertion you're you is done with your private key.
  - wsxcde 9y ago
    And are we expecting normal people to do key management?
    - bigdubs 9y ago
      Works fine in estonia.
    - ISL 9y ago
      I'm a normal person. My first attempt at key management was an utter failure, accidentally broadcasting a private key instead of the public one.

stuaxo 9y ago

That reminds me I need to update my address on Equifax. I found out it was wrong after being refused to be allowed to buy a mobile data plan (even though I had all the cash it counts as a credit issue). After 5-6 phone calls to get the address added to their system, I never did the final one a few days later to get them to update me once it was in their system. Absolute bunch of arses.

thephyber 9y ago
It's amazing how they make it difficult to give them more information. Granted, you aren't paying them directly, but you are effectively making their business more valuable by linking more accurate data to their profile of you.

to_bpr 9y ago

If this is deemed to be illegal then so be it, may the law deal with them. If not, I think it'd be hard to say that in the same situation I wouldn't do the same.

mnm1 9y ago

The only reasonable punishment for this is decades in jail. If they can't put these assholes in jail for running the credit check companies themselves, at least convict them for insider trading. These businesses should not exist to being with. I'm not sure what the penalty for insider trading is, but if the prosecutors a little creative, they could convict for each share sold. That should keep these scumbags in jail for the rest of their lives. Oops, I must be dreaming again ...

thephyber 9y ago
> If they can't put these assholes in jail for running the credit check companies themselves Who is "they"? You realize Congress has effectively cemented the place of the big three credit bureaus in the daily life of all Americans, right?

ChuckMcM 9y ago

That seems incredibly stupid. The CFO especially would be hard pressed to convince anyone either that he 'didn't know' there had been a breach or define himself as not an 'insider.' If the facts are as reported these folks are in a world of hurt.

thephyber 9y ago
It perhaps was stupid, but you forget that the burden of proof is the other way around. I was under the impression C-suites and directors had to file with the SEC in order to sell stock. I'd wager they did and that's how Bloomberg found out about it.
- scottlamb 9y ago
  The burden of proof for criminal charges is the other way around. I can think of a few ways he could "in a world of hurt" without being found guilty of criminal charges; in fact without any formal burden of proof: * A trial or even just discovery for a trial and having to pay lawyers more than he gained from selling this stock. * Angry shareholders or even board members could demand consequences such as docked pay or termination. * Negative media attention such as this article.

deleted 9y ago

[deleted]

21 9y ago

So one guy sold 1 mil of stock, the stock dropped 6%, so he avoided a 60k loss. Let's say he expected a 20% drop, and he saved 200k. If a were a millionaire, I wouldn't risk prison for 200k. Even the litigation to avoid prison could cost 100k. And this is the kind of thing you know all angles will be looked into (it took a news agency a few hours to unearth this). If he did it (insider trading), he is very stupid.

eigenvalue 9y ago
The stock is going to drop a lot more than 6%!
- 21 9y ago
  If you are so sure, short it now and make a lot of money.
  - ceejayoz 9y ago
    Markets are closed, but it's down 13% in after-market trading now.
    - drewmol 9y ago
      This is not financial advise: I remember a few commentors on HN recently saying they have made large gains by buying stock of companies after the news of cyber security breaches significantly reduced the share value, then waiting for the dust to settle(reaction-news-cycle to complete) and the price to rise again.
      - khuey 9y ago
        For the benefit of those reading: given that this may very well be the worst breach ever by far, and is likely to attract significant attention from government regulators and prosecutors, this is likely a particularly unwise time to begin attempting this strategy.

carbocation 9y ago

Out of curiosity, how would I go about looking this up?

thephyber 9y ago
Someone else in this thread linked to: http://google.brand.edgar-online.com/?sym=EFX http://google.brand.edgar-online.com/?sym=EFX

konceptz 9y ago

So the company stated that they (3 of them) did not know about the breach. I'm interested in what it takes to begin an investigation?

kevin_thibedeau 9y ago
https://denebleo.sec.gov/TCRExternal/index.xhtml https://denebleo.sec.gov/TCRExternal/index.xhtml

torbjorn 9y ago

If they wanted to do insider trading why would they sell only a small portion of their shares?

rshm 9y ago

Is it possible or are there free data sources if an average person wants to dig into tradings of Jul 27, two day before official date of discovery.

jannes 9y ago
No, that's not possible. These trades are only public because there is regulation that mandates Equifax to file trades by their employees above a certain level. Statement of Changes in Beneficial Ownership: https://en.wikipedia.org/wiki/Form_4 https://en.wikipedia.org/wiki/Form_4 Otherwise you have this trading information spread across thousands of brokers (and it doesn't become public)

cprayingmantis 9y ago

Equifax was down for a long time the other day. I should've treated that as a signal to short the stock...

coffeemug 9y ago

How many Equifax managers are there trading? Could this be law of large numbers?

wdewind 9y ago

Wouldn't they have scheduled these trades months in advance like most employees of public companies with insider trading policies?

anigbrowl 9y ago

Smart guys, they can get a presidential pardon. Great guys, the best.