3 ms·

Your Warren Buffet example would absolutely be illegal. Trading on the basis of material non-public price-sensitive information or tipping someone off so they

Your Warren Buffet example would absolutely be illegal. Trading on the basis of material non-public price-sensitive information or tipping someone off so they trade is market abuse (ie illegal) in Europe. In the US, the rules are a little more complex but basically yes it is illegal (if that's what he did). You absolutely don't have to have fiduciary responsibility, and you don't have to be an official insider, you simply have to trade on the basis of material non-public price-sensitive information in a product that's covered by the regulations or give that price-sensitive information to someone else in the form of a tip (with some expectation in the US of benefitting iirc).

soperj 4y ago
The only instance where this isn't illegal is if you're a part of congress or the federal reserve.
rblatz 4y ago
Then what about groups that do short reporting, they do an investigation into a company, take a short position, then release that information to the public? It sounds like that would fall under your definition.
- seanhunter 4y ago
  The research they did would be obtainable from public sources rather than being classified as material non-public. That said, if you worked for (say) Pershing Square and knew Bill Ackman was about to announce a short in some stock and you traded it is your personal account that would absolutely be illegal.
vageli 4y ago
This article [0] seems at odds with your statement. > Dirks v. SEC, 463 U.S. 646 (1983) was a pivotal U.S. Supreme Court decision regarding this type of insider trading. In Dirks, the Court held that a prosecutor could charge tip recipients with insider trading liability if the recipient had reason to believe that the information’s disclosure violated another’s fiduciary duty and if the recipient personally gained from acting upon the information. Dirks also created the constructive insider rule, which treats individuals working with a corporation on a professional basis as insiders if they come into contact with non-public information. [0]: https://www.law.cornell.edu/wex/insider_trading https://www.law.cornell.edu/wex/insider_trading
alasdair_ 4y ago
> Your Warren Buffet example would absolutely be illegal. My understanding is that it very much depends upon how the information was obtained. If I, as a third party, overhear Warren talking in a restaurant, that’s very different from hearing it during a Berkshire board meeting. Of course, everything, everywhere, is securities fraud. https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
- seanhunter 4y ago
  That's one of the things I was handwaving over when I said "in the US it's more complicated". In the context of being an employee and hearing the information in your job it would pretty much always be illegal.
iso1631 4y ago
If Joe Bloggs ran the autocue screen and got an advance copy of the speech, would it be illegal? What if he overheard Buffet practicing his speech and bought it - would that be illegal? If he were to tweet "I Joe Bloggs heard Buffett saying he is about to say something good about Microsoft" and then buy a few seconds later, would that be public information? When does public information change from being private information to being public information nobody has noticed?

soperj 4y ago

The only instance where this isn't illegal is if you're a part of congress or the federal reserve.

rblatz 4y ago

Then what about groups that do short reporting, they do an investigation into a company, take a short position, then release that information to the public? It sounds like that would fall under your definition.

seanhunter 4y ago
The research they did would be obtainable from public sources rather than being classified as material non-public. That said, if you worked for (say) Pershing Square and knew Bill Ackman was about to announce a short in some stock and you traded it is your personal account that would absolutely be illegal.

vageli 4y ago

This article [0] seems at odds with your statement. > Dirks v. SEC, 463 U.S. 646 (1983) was a pivotal U.S. Supreme Court decision regarding this type of insider trading. In Dirks, the Court held that a prosecutor could charge tip recipients with insider trading liability if the recipient had reason to believe that the information’s disclosure violated another’s fiduciary duty and if the recipient personally gained from acting upon the information. Dirks also created the constructive insider rule, which treats individuals working with a corporation on a professional basis as insiders if they come into contact with non-public information. [0]: https://www.law.cornell.edu/wex/insider_trading https://www.law.cornell.edu/wex/insider_trading

alasdair_ 4y ago

> Your Warren Buffet example would absolutely be illegal. My understanding is that it very much depends upon how the information was obtained. If I, as a third party, overhear Warren talking in a restaurant, that’s very different from hearing it during a Berkshire board meeting. Of course, everything, everywhere, is securities fraud. https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...

seanhunter 4y ago
That's one of the things I was handwaving over when I said "in the US it's more complicated". In the context of being an employee and hearing the information in your job it would pretty much always be illegal.

iso1631 4y ago

If Joe Bloggs ran the autocue screen and got an advance copy of the speech, would it be illegal? What if he overheard Buffet practicing his speech and bought it - would that be illegal? If he were to tweet "I Joe Bloggs heard Buffett saying he is about to say something good about Microsoft" and then buy a few seconds later, would that be public information? When does public information change from being private information to being public information nobody has noticed?