4 ms·

Setting aside what the law currently is, why is it illegal? This WaPo article [1] always seemed spot on to me. For most of us, individual stocks are a David and

by latch 9y ago

Setting aside what the law currently is, why is it illegal? This WaPo article [1] always seemed spot on to me. For most of us, individual stocks are a David and Goliath thing, and there should be no illusion of equality. [1] https://www.washingtonpost.com/news/wonk/wp/2013/07/26/insider-trading-makes-us-richer-better-informed-and-could-prevent-corporate-scandals-legalize-it/ https://www.washingtonpost.com/news/wonk/wp/2013/07/26/insid...

ikeboy 9y ago
Because he has a fiduciary duty to the shareholders, and by selling his shares he is misappropriating company information for personal benefit.
- dsacco 9y ago
  > Because he has a fiduciary duty to the shareholders, and by selling his shares he is misappropriating company information for personal benefit. This was a scheduled sale. It's not clear to me what the SEC is seeking to investigate. Breaking a scheduled sale to take a loss is also illegal insider trading.
  - wmf 9y ago
    He scheduled it after he knew about Meltdown.
  - bduerst 9y ago
    So is your point that insider trading isn't bad, or that this isn't insider trading? Because the WaPo article linked to is about insider trading.
    - dsacco 9y ago
      My point is that it's not insider trading. I also didn't link to any Washington Post article in my comment, so it's not clear to me if you responded to the right comment here.
      - bduerst 9y ago
        My bad - the OP was arguing that insider trading is a good thing, and the response was a criticism of that argument.
  - Natsu 9y ago
    I believe that means it depends on whether the schedule was set before or after he learned of this information. Mind you, I honestly don't know whether the schedule was set before or after in this case.
  - ams6110 9y ago
    But when was it scheduled? Intel has known of Meltdown/Spectre for some time (at least since June) and had planned an announcement for this week before the cat got out of the bag.
  - cybrjoe 9y ago
    It was "scheduled" on October, 30th 2017.
    - dsacco 9y ago
      The scheduling plan was adopted in 2015, according to Intel.
      - stonemetal 9y ago
        That is a bit of a red herring. He setup the automated trading schedule in 2015. In October 2017 he changed the rules of his automated trading schedule to dump his stock almost as if he was trading on insider information. http://www.forexlive.com/news/!/intel-ceo-reportedly-sold-39-million-worth-of-shares-after-learning-about-design-flaw-20180105 http://www.forexlive.com/news/!/intel-ceo-reportedly-sold-39...
  - ikeboy 9y ago
    1. It was scheduled in October from what I can tell 2. >Breaking a scheduled sale to take a loss is also illegal insider trading. Source? I don't think this is correct - it is illegal to insider trade but not to refrain from trading. See e.g. https://www.statnews.com/2016/08/08/insider-trading-biotech/ https://www.statnews.com/2016/08/08/insider-trading-biotech/
    - dsacco 9y ago
      The scheduling plan was adopted in 2015 according to Intel. Regarding the second point, yes it's a grey area. Refraining to trade when the trade is part of a scheduled plan in order to avoid a loss is insider trading if you have privileged information. In principle refraining to trade in general is probably illegal, but I admit that's a murkier area.
      - ikeboy 9y ago
        Elsewhere in this thread there are links showing this specific plan was changed in October. Intel can say whatever they want but it doesn't change what they publicly reported to the SEC. Do you have a source for your first claim that cancelling to avoid a loss is insider trading?
        dsacco 9y ago
        > Do you have a source for your first claim that cancelling to avoid a loss is insider trading? Yes: https://www.sec.gov/rules/final/33-7881.htm https://www.sec.gov/rules/final/33-7881.htm. The purpose of a prearranged stock plan is that it's autonomous and outside the control of insiders with privileged, confidential information. Making any decision with regards to the plan once it has been adopted, either to trade or not to trade, voids that autonomy.
        ikeboy 9y ago
        >the purchase or sale of a security of any issuer I don't see where they ban refraining from trading.
  - joshuamorton 9y ago
    I believe the contention is that the scheduling too place after Intel was aware of the vuln.
  - smallnamespace 9y ago
    > Breaking a scheduled sale to take a loss is also illegal insider trading. Actually it might be legal. Which doesn't make sense, because trading or not trading based on insider info has the same effective impact on the market, but it may not be 'insider trading' if you decide not to trade. 'After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade.' It doesn't seem like Krzanich falls under this though because he went through with the sale. https://en.wikipedia.org/wiki/SEC_Rule_10b5-1#A_possible_loophole:_canceling_plans https://en.wikipedia.org/wiki/SEC_Rule_10b5-1#A_possible_loo...
  - megy 9y ago
    It was a scheduled sale of 30,000, and he ended up selling 600,000 shares.
JumpCrisscross 9y ago
> why is it illegal? Google disclosed the vulnerability to Intel in June. On October 26th, Intel filed its quarterly numbers and made no mention of Project Zero or the word "vulnerability." It failed, in Item 1A, to disclose any new risk factors [1]. On October 30th, Krzanich gave trading instructions [2]. On November 29th, the trades occurred; on December 1st, their confirmations were disclosed [2]. I'm not an expert on the sale of stock in public companies by insiders. But implementing sale instructions after finding a material risk factor and failing to disclose it in a subsequent filing looks shady. (I continue to default to the assumption of sloppiness over bad intent, though even that is punishable, albeit with fines versus jail time.) [1] https://www.sec.gov/Archives/edgar/data/50863/000005086317000048/a2017q3-10qdocument.htm#sEC4B4E5BB2945CE9B97383143D9B5368 https://www.sec.gov/Archives/edgar/data/50863/00000508631700... [2] https://www.sec.gov/Archives/edgar/data/50863/000112760217033679/xslF345X03/form4.xml https://www.sec.gov/Archives/edgar/data/50863/00011276021703... Explanation 1
- dsacco 9y ago
  I agree this looks shady, but from a legality standpoint, does this take precedent over a pre-arranged stock trading plan that was adopted in 2015?
  - bduerst 9y ago
    I don't think the issue is if or when he sold the stock, but how much he sold and why he changed it to be 9x the amount previously scheduled.
lovich 9y ago
So you think that people who have the ability to affect the value of a publicly traded good should be allowed to trade on actions that they can plan and know about in advance? Especially when the way insider traders benefit the most is by selling off stock before an announcement like Intel's, which by definition hurts whoever they sell to as they are left holding the bag. If you care that little about equality why not go all the way and just say laws don't apply to the rich, not just in fact but by law. The only point of having laws is prevent people with power from amassing ever more power and hurting others. Without that there would be no reason for anyone to not take whatever they can the moment they get an opportunity
- latch 9y ago
  > So you think that people who have the ability to affect the value of a publicly traded good should be allowed to trade on actions that they can plan and know about in advance? Insider trading laws don't stop this from happening. People not considered "insiders" can impact the price of stock. For example, in 2007 Lululemon stocks took a temporary dive when their seaweed claim was challenged: "Not so, says the New York Times, which commissioned its own test after a Lululemon investor, who is shorting its stock, supplied the paper with lab results." That, of course, doesn't include market professionals: "Market professionals gain disproportionately from bans on insider trading because they are in a position to act on information that insiders cannot use, and can do so more quickly than any other group, including shareholders" [1] [1] https://books.google.com/books?id=l9PuCAAAQBAJ&pg=PA161&lpg=PA161&source=bl&ots=_IRz81o-U3&sig=ZMJ6tFrBXZ-a_SxvXkp5k0rKVR0&hl=en&sa=X&ved=0ahUKEwjkreK-9cnYAhVCuY8KHeKkA-8Q6AEIPDAF#v=onepage https://books.google.com/books?id=l9PuCAAAQBAJ&pg=PA161&lpg=...
- rvern 9y ago
  > which by definition hurts whoever they sell to as they are left holding the bag Of course. The Intel CEO sells stock to investors without telling them that there is a vulnerability that makes the stock worth much less than they think, thus hurting these investors. Sounds intuitive, right? The investors he sells to had already sent an order to buy to their broker. They were going to buy at the same or worse price anyway, so they aren't harmed by this. Someone else is harmed, but that's the market professionals who, months later, don't get an opportunity to profit off of the news before everyone else. I'm sure economics not being intuitive has something to do with why democracies end up with bad policies all the time.

by latch 9y ago

ikeboy 9y ago

Because he has a fiduciary duty to the shareholders, and by selling his shares he is misappropriating company information for personal benefit.

dsacco 9y ago
> Because he has a fiduciary duty to the shareholders, and by selling his shares he is misappropriating company information for personal benefit. This was a scheduled sale. It's not clear to me what the SEC is seeking to investigate. Breaking a scheduled sale to take a loss is also illegal insider trading.
- wmf 9y ago
  He scheduled it after he knew about Meltdown.
- bduerst 9y ago
  So is your point that insider trading isn't bad, or that this isn't insider trading? Because the WaPo article linked to is about insider trading.
  - dsacco 9y ago
    My point is that it's not insider trading. I also didn't link to any Washington Post article in my comment, so it's not clear to me if you responded to the right comment here.
    - bduerst 9y ago
      My bad - the OP was arguing that insider trading is a good thing, and the response was a criticism of that argument.
- Natsu 9y ago
  I believe that means it depends on whether the schedule was set before or after he learned of this information. Mind you, I honestly don't know whether the schedule was set before or after in this case.
- ams6110 9y ago
  But when was it scheduled? Intel has known of Meltdown/Spectre for some time (at least since June) and had planned an announcement for this week before the cat got out of the bag.
- cybrjoe 9y ago
  It was "scheduled" on October, 30th 2017.
  - dsacco 9y ago
    The scheduling plan was adopted in 2015, according to Intel.
    - stonemetal 9y ago
      That is a bit of a red herring. He setup the automated trading schedule in 2015. In October 2017 he changed the rules of his automated trading schedule to dump his stock almost as if he was trading on insider information. http://www.forexlive.com/news/!/intel-ceo-reportedly-sold-39-million-worth-of-shares-after-learning-about-design-flaw-20180105 http://www.forexlive.com/news/!/intel-ceo-reportedly-sold-39...
- ikeboy 9y ago
  1. It was scheduled in October from what I can tell 2. >Breaking a scheduled sale to take a loss is also illegal insider trading. Source? I don't think this is correct - it is illegal to insider trade but not to refrain from trading. See e.g. https://www.statnews.com/2016/08/08/insider-trading-biotech/ https://www.statnews.com/2016/08/08/insider-trading-biotech/
  - dsacco 9y ago
    The scheduling plan was adopted in 2015 according to Intel. Regarding the second point, yes it's a grey area. Refraining to trade when the trade is part of a scheduled plan in order to avoid a loss is insider trading if you have privileged information. In principle refraining to trade in general is probably illegal, but I admit that's a murkier area.
    - ikeboy 9y ago
      Elsewhere in this thread there are links showing this specific plan was changed in October. Intel can say whatever they want but it doesn't change what they publicly reported to the SEC. Do you have a source for your first claim that cancelling to avoid a loss is insider trading?
      - dsacco 9y ago
        > Do you have a source for your first claim that cancelling to avoid a loss is insider trading? Yes: https://www.sec.gov/rules/final/33-7881.htm https://www.sec.gov/rules/final/33-7881.htm. The purpose of a prearranged stock plan is that it's autonomous and outside the control of insiders with privileged, confidential information. Making any decision with regards to the plan once it has been adopted, either to trade or not to trade, voids that autonomy.
        ikeboy 9y ago
        >the purchase or sale of a security of any issuer I don't see where they ban refraining from trading.
- joshuamorton 9y ago
  I believe the contention is that the scheduling too place after Intel was aware of the vuln.
- smallnamespace 9y ago
  > Breaking a scheduled sale to take a loss is also illegal insider trading. Actually it might be legal. Which doesn't make sense, because trading or not trading based on insider info has the same effective impact on the market, but it may not be 'insider trading' if you decide not to trade. 'After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade.' It doesn't seem like Krzanich falls under this though because he went through with the sale. https://en.wikipedia.org/wiki/SEC_Rule_10b5-1#A_possible_loophole:_canceling_plans https://en.wikipedia.org/wiki/SEC_Rule_10b5-1#A_possible_loo...
- megy 9y ago
  It was a scheduled sale of 30,000, and he ended up selling 600,000 shares.

JumpCrisscross 9y ago

> why is it illegal? Google disclosed the vulnerability to Intel in June. On October 26th, Intel filed its quarterly numbers and made no mention of Project Zero or the word "vulnerability." It failed, in Item 1A, to disclose any new risk factors [1]. On October 30th, Krzanich gave trading instructions [2]. On November 29th, the trades occurred; on December 1st, their confirmations were disclosed [2]. I'm not an expert on the sale of stock in public companies by insiders. But implementing sale instructions after finding a material risk factor and failing to disclose it in a subsequent filing looks shady. (I continue to default to the assumption of sloppiness over bad intent, though even that is punishable, albeit with fines versus jail time.) [1] https://www.sec.gov/Archives/edgar/data/50863/000005086317000048/a2017q3-10qdocument.htm#sEC4B4E5BB2945CE9B97383143D9B5368 https://www.sec.gov/Archives/edgar/data/50863/00000508631700... [2] https://www.sec.gov/Archives/edgar/data/50863/000112760217033679/xslF345X03/form4.xml https://www.sec.gov/Archives/edgar/data/50863/00011276021703... Explanation 1

dsacco 9y ago
I agree this looks shady, but from a legality standpoint, does this take precedent over a pre-arranged stock trading plan that was adopted in 2015?
- bduerst 9y ago
  I don't think the issue is if or when he sold the stock, but how much he sold and why he changed it to be 9x the amount previously scheduled.

lovich 9y ago

So you think that people who have the ability to affect the value of a publicly traded good should be allowed to trade on actions that they can plan and know about in advance? Especially when the way insider traders benefit the most is by selling off stock before an announcement like Intel's, which by definition hurts whoever they sell to as they are left holding the bag. If you care that little about equality why not go all the way and just say laws don't apply to the rich, not just in fact but by law. The only point of having laws is prevent people with power from amassing ever more power and hurting others. Without that there would be no reason for anyone to not take whatever they can the moment they get an opportunity

latch 9y ago
> So you think that people who have the ability to affect the value of a publicly traded good should be allowed to trade on actions that they can plan and know about in advance? Insider trading laws don't stop this from happening. People not considered "insiders" can impact the price of stock. For example, in 2007 Lululemon stocks took a temporary dive when their seaweed claim was challenged: "Not so, says the New York Times, which commissioned its own test after a Lululemon investor, who is shorting its stock, supplied the paper with lab results." That, of course, doesn't include market professionals: "Market professionals gain disproportionately from bans on insider trading because they are in a position to act on information that insiders cannot use, and can do so more quickly than any other group, including shareholders" [1] [1] https://books.google.com/books?id=l9PuCAAAQBAJ&pg=PA161&lpg=PA161&source=bl&ots=_IRz81o-U3&sig=ZMJ6tFrBXZ-a_SxvXkp5k0rKVR0&hl=en&sa=X&ved=0ahUKEwjkreK-9cnYAhVCuY8KHeKkA-8Q6AEIPDAF#v=onepage https://books.google.com/books?id=l9PuCAAAQBAJ&pg=PA161&lpg=...
rvern 9y ago
> which by definition hurts whoever they sell to as they are left holding the bag Of course. The Intel CEO sells stock to investors without telling them that there is a vulnerability that makes the stock worth much less than they think, thus hurting these investors. Sounds intuitive, right? The investors he sells to had already sent an order to buy to their broker. They were going to buy at the same or worse price anyway, so they aren't harmed by this. Someone else is harmed, but that's the market professionals who, months later, don't get an opportunity to profit off of the news before everyone else. I'm sure economics not being intuitive has something to do with why democracies end up with bad policies all the time.