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> When a company insider uses private company information to trade (or colludes with an outside party to do so) they are stealing material non-public informatio

> When a company insider uses private company information to trade (or colludes with an outside party to do so) they are stealing material non-public information from the company for their own benefit. I must be dumb, but I don't understand this statement... How is that a "theft"? You knowing that I eat 2 eggs in the morning when I don't want people to know is not you "stealing" information from me.

piker 7y ago
You're stealing value by profiting on information which you had some duty to protect. For example, a company executive who knows that one of the company's products is about to be recalled generally owes a duty of loyalty to the company not to profit off of that knowledge to the disadvantage of the company.
- mochomocha 7y ago
  From whom is it stealing value from? Random other potential investors on the stock market? Since the parent comment is specifically mentioning semantics, this is the distinction "theft" vs "fairness" that I don't really understand. From an outsider perspective like me (I don't own stocks except through my 401k), Wall Street seems like a game of information asymmetry anyway where the only winners have an information edge at some moment in time. Now the question is about how "fairly" was the information obtained which seems pretty blurry to define to me.
  - squaresmile 7y ago
    From the shareholders (owners) whom they have duty to.
JimmyAustin 7y ago
When a company gives you access to private information (like sales figures for the next quarter), you have an obligation not to trade securities on that information, as you are essentially taking (or reducing) the opportunity of the company to trade on that information itself. However most of my information is from reading Money Stuff, so don't take me at my word.
RcouF1uZ4gsC 7y ago
Perhaps an analogy would help. Suppose you are giving a prize for someone who guesses how many eggs you eat in the morning. If I watch you checkout at the grocery store and based on the number of eggs you buy, guess that you eat 2 eggs a day, and win the prize, that is not theft. If however your chef who prepares you breakfast every morning “guesses” you eat 2 eggs, then that would be problematic.
- jakelazaroff 7y ago
  According to OP, insider trading is about theft, not fairness. Given that, how is it problematic for the chef in your analogy to guess? They're not stealing, they're just acting in ways most people would consider unfair.
  - PeterisP 7y ago
    If a chef is fully employed by you, then all that information gained/used in the course of that employment also belongs to you. If the chef working in your restaurant sells a cake he made there and puts the money in his pocket instead of yours, that's theft. It's legal to sell cakes the chef made, it's just the the resulting value belongs to the employer and not to the chef personally. If the chef working in your restaurant sells some of the cooking ingredients and puts the money in his pocket instead of yours, that's theft. It's legal to sell spare cooking ingredients from a kitchen, it's just that the resulting value belongs to the employer. And in the exact same manner, if the chef working in your restaurant sells the customer order statistics (e.g. how many eggs were eaten) and puts the money in his pocket instead of yours, that's theft. It's legal to sell customer order stats, it's just that as far as those stats have value, that value belongs to the employer and not to the chef personally.
ThrustVectoring 7y ago
Some information has material amounts of actual dollar value. Whoever knows that your employer has an acquisition in the works that will be announced tomorrow has an extraordinarily easy way to monetize that. This information rightfully belongs to your employer, who is keeping it under wraps for financially important business reasons. Sharing it or acting on it means enriching yourself at the expense of those business reasons (or more directly, through influencing stock prices).
- mochomocha 7y ago
  I know that. I'm asking specifically about the semantics of "theft" vs "fairness" here. I don't think the word "theft" makes much sense in this context.
  - sokoloff 7y ago
    I think the theft angle here is analogous to the theft angle in piracy of digital content. When I take information entrusted to me by my company and use that information to profit in the market, I have taken information, used it in a manner not authorized, and profited. That's different from someone else unaffiliated with the company independently deriving the information, using it in the market, and profiting. As an example, the researchers who discovered VW's cheating on diesel emissions tests (assuming they were independent) would be perfectly within their rights to short or buy puts on Volkswagen. VW executives who were responding to the EPA inquiry or otherwise discovered the cheating would not be within their rights. In both cases, there was a moment where that information was material to the valuation of VW and not public, yet one group could legally trade on it and another could not.
  - ThrustVectoring 7y ago
    It's theft in the same way that copying the address and secret key of a bitcoin wallet is theft.
TheCoelacanth 7y ago
> You knowing that I eat 2 eggs in the morning when I don't want people to know is not you "stealing" information from me. Correct, you don't necessarily have to "steal" that information to find it out. If you hire me to cook to you breakfast with the understanding that your breakfast habits are confidential and I give that information away, then that is "stealing" information because I have a duty to keep that information private. If I spy on you while you are eating and figure it out and give the information away, then I did not "steal" the information because I don't have a duty to keep that information secret.

piker 7y ago

You're stealing value by profiting on information which you had some duty to protect. For example, a company executive who knows that one of the company's products is about to be recalled generally owes a duty of loyalty to the company not to profit off of that knowledge to the disadvantage of the company.

mochomocha 7y ago
From whom is it stealing value from? Random other potential investors on the stock market? Since the parent comment is specifically mentioning semantics, this is the distinction "theft" vs "fairness" that I don't really understand. From an outsider perspective like me (I don't own stocks except through my 401k), Wall Street seems like a game of information asymmetry anyway where the only winners have an information edge at some moment in time. Now the question is about how "fairly" was the information obtained which seems pretty blurry to define to me.
- squaresmile 7y ago
  From the shareholders (owners) whom they have duty to.

JimmyAustin 7y ago

When a company gives you access to private information (like sales figures for the next quarter), you have an obligation not to trade securities on that information, as you are essentially taking (or reducing) the opportunity of the company to trade on that information itself. However most of my information is from reading Money Stuff, so don't take me at my word.

RcouF1uZ4gsC 7y ago

Perhaps an analogy would help. Suppose you are giving a prize for someone who guesses how many eggs you eat in the morning. If I watch you checkout at the grocery store and based on the number of eggs you buy, guess that you eat 2 eggs a day, and win the prize, that is not theft. If however your chef who prepares you breakfast every morning “guesses” you eat 2 eggs, then that would be problematic.

jakelazaroff 7y ago
According to OP, insider trading is about theft, not fairness. Given that, how is it problematic for the chef in your analogy to guess? They're not stealing, they're just acting in ways most people would consider unfair.
- PeterisP 7y ago
  If a chef is fully employed by you, then all that information gained/used in the course of that employment also belongs to you. If the chef working in your restaurant sells a cake he made there and puts the money in his pocket instead of yours, that's theft. It's legal to sell cakes the chef made, it's just the the resulting value belongs to the employer and not to the chef personally. If the chef working in your restaurant sells some of the cooking ingredients and puts the money in his pocket instead of yours, that's theft. It's legal to sell spare cooking ingredients from a kitchen, it's just that the resulting value belongs to the employer. And in the exact same manner, if the chef working in your restaurant sells the customer order statistics (e.g. how many eggs were eaten) and puts the money in his pocket instead of yours, that's theft. It's legal to sell customer order stats, it's just that as far as those stats have value, that value belongs to the employer and not to the chef personally.

ThrustVectoring 7y ago

Some information has material amounts of actual dollar value. Whoever knows that your employer has an acquisition in the works that will be announced tomorrow has an extraordinarily easy way to monetize that. This information rightfully belongs to your employer, who is keeping it under wraps for financially important business reasons. Sharing it or acting on it means enriching yourself at the expense of those business reasons (or more directly, through influencing stock prices).

mochomocha 7y ago
I know that. I'm asking specifically about the semantics of "theft" vs "fairness" here. I don't think the word "theft" makes much sense in this context.
- sokoloff 7y ago
  I think the theft angle here is analogous to the theft angle in piracy of digital content. When I take information entrusted to me by my company and use that information to profit in the market, I have taken information, used it in a manner not authorized, and profited. That's different from someone else unaffiliated with the company independently deriving the information, using it in the market, and profiting. As an example, the researchers who discovered VW's cheating on diesel emissions tests (assuming they were independent) would be perfectly within their rights to short or buy puts on Volkswagen. VW executives who were responding to the EPA inquiry or otherwise discovered the cheating would not be within their rights. In both cases, there was a moment where that information was material to the valuation of VW and not public, yet one group could legally trade on it and another could not.
- ThrustVectoring 7y ago
  It's theft in the same way that copying the address and secret key of a bitcoin wallet is theft.

TheCoelacanth 7y ago

> You knowing that I eat 2 eggs in the morning when I don't want people to know is not you "stealing" information from me. Correct, you don't necessarily have to "steal" that information to find it out. If you hire me to cook to you breakfast with the understanding that your breakfast habits are confidential and I give that information away, then that is "stealing" information because I have a duty to keep that information private. If I spy on you while you are eating and figure it out and give the information away, then I did not "steal" the information because I don't have a duty to keep that information secret.