4 ms·

During the dotcom days, when employees had desk phones, some of my coworkers would get unsolicited calls from analysts or other people searching for inside info

During the dotcom days, when employees had desk phones, some of my coworkers would get unsolicited calls from analysts or other people searching for inside information about our company. They would engage them in conversation, try to become friends with them over months so that they could reveal even the smallest bit of inside information for them. The lengths that people will go to get some sort of information edge to make money, even doing illegal things, is incredible.

shalmanese 4y ago
Is that illegal for analysts? If an employee chooses to share confidential info to any random person, that's a breach of contract for the employee but does the analyst face any culpability?
- distrill 4y ago
  if they trade on material non public information, then yes that's illegal.
- otikik 4y ago
  It will greatly depend on the specifics, I suspect. An analyst hears something being talked about on a different table in a restaurant by chance is legal. An analyst offering money to a retired nuclear weapons defense contractor in order to sell might… suddenly disappear. In between those two extremes? Ask a lawyer, not the internet.
- sangnoir 4y ago
  Insider trading is illegal even for non-employees. Sharing insider info with a spouse or sibling who trade on it will get all parties involved on trouble with the SEC
  - jcrawfordor 4y ago
    Usually the information these types of analysts are trying to collect isn't really "material nonpublic information" in the somewhat narrow sense of insider trading law. Some of them aren't even in the investing industry but rather work for advisory organizations like Gartner. There's sort of a wide gray area between clear MNPI and information that the company just doesn't publish. Things like employee counts, general product plans, subjective opinions about user feedback, etc.
    - purpleblue 4y ago
      At least back then, they were straight asking for MNPI, although I think back then it wasn't called that. Whatever information the person was willing to provide, these people were willing to take.
  - landemva 4y ago
    Nancy Pelosi and husband frequently trade on inside information. Supposedly it is OK due to her title of nobility, or something like that. Presidents at Federal Reserve, Kaplan and Rosengren, were reported to have been swinging seven figure stock index trades during corona panic timeframe. https://news.yahoo.com/a-timeline-of-the-federal-reserves-trading-scandal-104415556.html https://news.yahoo.com/a-timeline-of-the-federal-reserves-tr... The really big players are not prosecuted.
    - KerrAvon 4y ago
      Gonna need a non-right-wing source for that “frequent” claim. Here’s some senators (mostly republicans, but also Feinstein — can we please recall her already? she has late-stage Alzheimer’s, for fuck’s sake) doing it blatantly: https://www.forbes.com/sites/jackkelly/2020/03/20/senators-accused-of-insider-trading-dumping-stocks-after-coronavirus-briefings/?sh=3324ebfe4a45 https://www.forbes.com/sites/jackkelly/2020/03/20/senators-a... The
      - landemva 4y ago
        You linked to a blogger on the Forbes site. His description of himself: "Jack Kelly I write actionable interview, career and salary advice." I didn't mention parties, though you seem to view things through a political lens. I view it as abuse of power. So many view this politically that people like McCain are re-elected until they time out. Go voters.
    - deleted 4y ago
      [deleted]
  - deleted 4y ago
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- purpleblue 4y ago
  Yes it's totally illegal but in the late 90s/early 2000s we weren't in the same level of surveillance as we are now.
  - kasey_junk 4y ago
    The SEC has brought some novel cases lately and won so I am much less sure of myself than I would have been 5 or 10 years ago, but this certainly doesn’t look like classical American insider trading to me. The analyst in this case has no fiduciary duty to the harmed parties so they wouldn’t be insiders. I’d talk to a lawyer but it’s for sure not “totally illegal”. It’s in the grey area.
    - sangnoir 4y ago
      > The analyst in this case has no fiduciary duty to the harmed parties so they wouldn’t be insiders. The current doctrine - as Matt Levine puts in in his recurring motif "Everything is a Securities Fraud" - is not about fiduciary duty, but about an unfair information edge and basically "cheating" other people trading without insider information. You don't have to be an insider to be guilty of insider trading - it is sufficient to trade on insider information. I can't recall any recent case where an outsider eon against the SEC by arguing they don't have a contractual duty to shareholders, because the alleged harm is broader than that
      - kasey_junk 4y ago
        The issue isn’t so much being an insider, it’s did you get access to the data through nefarious purposes or did you have an obligation to protect that data. If I’m an analyst and I cold call someone with a duty to protect the data, it’s not at all clear how I’ve stolen from the shareholders. Which is the basis of US insider trading. Theft, not information asymmetry. Compare that to if I steal a binder from my sleeping girlfriend (a recent case). She has a duty, but I’ve stolen from the shareholders in that case. That said, the SEC has certainly expanded the definition of insider trading recently with their court hypothesis’
- lmm 4y ago
  Only if the analyst knows or should know that the employee is getting a "personal benefit" for sharing this information, or the analyst learns it in a context where they have a duty to keep it confidential. Handing an employee a sack of cash to tell you confidential information you then trade on? Illegal. Overhearing confidential information on the train and trading on that? Totally fine. Trading on confidential information from your brother-in-law? Illegal (family members are assumed to automatically meet the personal benefit test). Something you heard in a therapy session? Illegal (there's a duty of confidentiality). Something your casual acquaintance tells you, with no close relationship and no obvious quid pro pro? That one's been litigated back and forth in recent years, with different cases coming out both ways (to the point that Matt Levine has a running joke about the sacred duty of golf-buddy confidentiality). You'd probably have to roll the dice in court.
  - adament 4y ago
    My understanding is that under current EU market abuse regulations trading on inside information* that you overheard on the train is still insider trading. Sharing inside information in a manner not required to fulfill your role (i.e. with an analyst if you are a regular employee, or with a specific analyst before the general analyst community if you are the management) is also a violation of MAR (dissemination) even if nobody trades on it. It is only if the information is public that you can trade on it (with an exemption for market makers). * Under MAR confidential information is not necessarily inside information, as one of the prerequisites for the information to be inside information it must be likely that it has a significant effect on the price of a financial instrument if made public.

shalmanese 4y ago

Is that illegal for analysts? If an employee chooses to share confidential info to any random person, that's a breach of contract for the employee but does the analyst face any culpability?

distrill 4y ago
if they trade on material non public information, then yes that's illegal.
otikik 4y ago
It will greatly depend on the specifics, I suspect. An analyst hears something being talked about on a different table in a restaurant by chance is legal. An analyst offering money to a retired nuclear weapons defense contractor in order to sell might… suddenly disappear. In between those two extremes? Ask a lawyer, not the internet.
sangnoir 4y ago
Insider trading is illegal even for non-employees. Sharing insider info with a spouse or sibling who trade on it will get all parties involved on trouble with the SEC
- jcrawfordor 4y ago
  Usually the information these types of analysts are trying to collect isn't really "material nonpublic information" in the somewhat narrow sense of insider trading law. Some of them aren't even in the investing industry but rather work for advisory organizations like Gartner. There's sort of a wide gray area between clear MNPI and information that the company just doesn't publish. Things like employee counts, general product plans, subjective opinions about user feedback, etc.
  - purpleblue 4y ago
    At least back then, they were straight asking for MNPI, although I think back then it wasn't called that. Whatever information the person was willing to provide, these people were willing to take.
- landemva 4y ago
  Nancy Pelosi and husband frequently trade on inside information. Supposedly it is OK due to her title of nobility, or something like that. Presidents at Federal Reserve, Kaplan and Rosengren, were reported to have been swinging seven figure stock index trades during corona panic timeframe. https://news.yahoo.com/a-timeline-of-the-federal-reserves-trading-scandal-104415556.html https://news.yahoo.com/a-timeline-of-the-federal-reserves-tr... The really big players are not prosecuted.
  - KerrAvon 4y ago
    Gonna need a non-right-wing source for that “frequent” claim. Here’s some senators (mostly republicans, but also Feinstein — can we please recall her already? she has late-stage Alzheimer’s, for fuck’s sake) doing it blatantly: https://www.forbes.com/sites/jackkelly/2020/03/20/senators-accused-of-insider-trading-dumping-stocks-after-coronavirus-briefings/?sh=3324ebfe4a45 https://www.forbes.com/sites/jackkelly/2020/03/20/senators-a... The
    - landemva 4y ago
      You linked to a blogger on the Forbes site. His description of himself: "Jack Kelly I write actionable interview, career and salary advice." I didn't mention parties, though you seem to view things through a political lens. I view it as abuse of power. So many view this politically that people like McCain are re-elected until they time out. Go voters.
  - deleted 4y ago
    [deleted]
- deleted 4y ago
  [deleted]
purpleblue 4y ago
Yes it's totally illegal but in the late 90s/early 2000s we weren't in the same level of surveillance as we are now.
- kasey_junk 4y ago
  The SEC has brought some novel cases lately and won so I am much less sure of myself than I would have been 5 or 10 years ago, but this certainly doesn’t look like classical American insider trading to me. The analyst in this case has no fiduciary duty to the harmed parties so they wouldn’t be insiders. I’d talk to a lawyer but it’s for sure not “totally illegal”. It’s in the grey area.
  - sangnoir 4y ago
    > The analyst in this case has no fiduciary duty to the harmed parties so they wouldn’t be insiders. The current doctrine - as Matt Levine puts in in his recurring motif "Everything is a Securities Fraud" - is not about fiduciary duty, but about an unfair information edge and basically "cheating" other people trading without insider information. You don't have to be an insider to be guilty of insider trading - it is sufficient to trade on insider information. I can't recall any recent case where an outsider eon against the SEC by arguing they don't have a contractual duty to shareholders, because the alleged harm is broader than that
    - kasey_junk 4y ago
      The issue isn’t so much being an insider, it’s did you get access to the data through nefarious purposes or did you have an obligation to protect that data. If I’m an analyst and I cold call someone with a duty to protect the data, it’s not at all clear how I’ve stolen from the shareholders. Which is the basis of US insider trading. Theft, not information asymmetry. Compare that to if I steal a binder from my sleeping girlfriend (a recent case). She has a duty, but I’ve stolen from the shareholders in that case. That said, the SEC has certainly expanded the definition of insider trading recently with their court hypothesis’
lmm 4y ago
Only if the analyst knows or should know that the employee is getting a "personal benefit" for sharing this information, or the analyst learns it in a context where they have a duty to keep it confidential. Handing an employee a sack of cash to tell you confidential information you then trade on? Illegal. Overhearing confidential information on the train and trading on that? Totally fine. Trading on confidential information from your brother-in-law? Illegal (family members are assumed to automatically meet the personal benefit test). Something you heard in a therapy session? Illegal (there's a duty of confidentiality). Something your casual acquaintance tells you, with no close relationship and no obvious quid pro pro? That one's been litigated back and forth in recent years, with different cases coming out both ways (to the point that Matt Levine has a running joke about the sacred duty of golf-buddy confidentiality). You'd probably have to roll the dice in court.
- adament 4y ago
  My understanding is that under current EU market abuse regulations trading on inside information* that you overheard on the train is still insider trading. Sharing inside information in a manner not required to fulfill your role (i.e. with an analyst if you are a regular employee, or with a specific analyst before the general analyst community if you are the management) is also a violation of MAR (dissemination) even if nobody trades on it. It is only if the information is public that you can trade on it (with an exemption for market makers). * Under MAR confidential information is not necessarily inside information, as one of the prerequisites for the information to be inside information it must be likely that it has a significant effect on the price of a financial instrument if made public.