2 ms·

But I'm pretty sure I read a case of a guy who traded on a future acquisition and was convicted on insider trading charges. He surreptitiously overheard it from

But I'm pretty sure I read a case of a guy who traded on a future acquisition and was convicted on insider trading charges. He surreptitiously overheard it from his fiance, who worked for the company. Doesn't this guy not owe a company he doesn't work for a fiduciary duty....?

cko 3y ago
Sounds like he failed in his fiance duties.
djbusby 3y ago
The family has the obligation. When you're trading one of the questions is if you, or your family, has rank at public companies. That would make the link from the guy, to wife, to company.
- lowbloodsugar 3y ago
  Unless your wife is the leader of the house.
  - kasey_junk 3y ago
    The Nancy Pelosi case is extremely interesting from a market manipulation point of view! It’s one of the strongest arguments for extreme restrictions on Congress trading. Trumps behavior in office is a similarly strong argument for extreme restrictions on Presidential trading. But it’s not strictly about insider trading. Pelosi (or trump or Pelosis’ husband) are not traditionally insiders. The testimony they receive is by its nature public. That we’ve allowed lots of things that shouldn’t be secret doesn’t change that. That elected officials can be corrupted by their power isn’t an insider trading issue, it’s a corruption one.
    - lowbloodsugar 3y ago
      Sure. But the issue is when they have insider information on how a vote is going to go, when the vote impacts stock prices. She has material information that the public does not.
      - kasey_junk 3y ago
        But she's not an insider. The common belief is that insider trading laws are about having data that the market doesn't know. In the US that's just not the basis for the law. In the US there is no expectation that everyone has the same information when trading. The expectation is that people who have a duty to the shareholders are not trading on any non public material information. If you don't have a duty to the shareholders, it doesn't matter how you trade. Is that the appropriate standard to hold congress people to? I don't know, personally i think, no. But its not obvious that its incorrect from a legal point of view. What fiduciary duty does Nancy Pelosi have to some fund her husband owns? I'm good with a definition that says "once you become a congress person you have fiduciary duty to everyone" but thats not the law now.
        lowbloodsugar 3y ago
        So if I’m a billionaire, I can say I’m going to buy a company, to build up its stock price, and then short it and publicly walk away? That’s fine because I don’t have a duty to that company’s shareholders? I mean sure, can only do it once, but that’s legal?
        kasey_junk 3y ago
        :shrug: it’s not insider trading (by historical norms) that doesn’t make it legal. There are other laws that you might be breaking.
wongarsu 3y ago
There's a sliding scale of accountability from "I did it", "My wife did it", "My fiance did it", "my significant other did it", "my neighbour did it" to "some person I don't know did it". A fiance is still close enough that they are captured by lots of regulation, because collusion/cooperation between partners is so common.
- jandrese 3y ago
  I feel like the SEC must have already taken into account the possibility of a "Strangers on a Train" situation where an insider tracks down an anonymous third party to commit the crime with the expectation of being paid back a percentage at some later date.
  - kevinmchugh 3y ago
    There are convictions for golf buddies swapping tips. In the perfect strangers situation, the tip receiver has no incentive to ever pay back the tipper. There's no legal recourse
    - jandrese 3y ago
      Except the guy knows where you live and has already shown a willingness to break the law in ways where he thinks he won't be caught. If the top receiver suddenly finds himself dead there is nothing pointing back towards the original inside trader. This is the stuff of tawdry crime thrillers, but it's certainly not so far out of the realm of possibility that the SEC can just ignore it.
cmcaleer 3y ago
https://www.sec.gov/litigation/litreleases/lr-24375 https://www.sec.gov/litigation/litreleases/lr-24375 The case for those wondering.
bombcar 3y ago
Many financial laws consider spouses to be "identical" from the point of view of law. Since your wife would benefit from you acting insider knowledge she has, it applies.
foota 3y ago
is this not a breach of "other relationship of trust and confidence"?
jabroni_salad 3y ago
As a someone in scope of FINRA, yes actually. Your immediate nuclear family owes your company that duty and you have to grant your company's watchdog the ability to monitor your family member's investments for restricted trades. See also: I am not allowed to use robinhood at all because their referral program can reward you with a restricted security. Nobody was grandfathered and every RH user at my firm was told to xfer out or find a new job. I also can't use any roboadvisor. For us peons, independence is a serious matter. It's just the rich and powerful that get to flaunt it.

cko 3y ago

Sounds like he failed in his fiance duties.

djbusby 3y ago

The family has the obligation. When you're trading one of the questions is if you, or your family, has rank at public companies. That would make the link from the guy, to wife, to company.

lowbloodsugar 3y ago
Unless your wife is the leader of the house.
- kasey_junk 3y ago
  The Nancy Pelosi case is extremely interesting from a market manipulation point of view! It’s one of the strongest arguments for extreme restrictions on Congress trading. Trumps behavior in office is a similarly strong argument for extreme restrictions on Presidential trading. But it’s not strictly about insider trading. Pelosi (or trump or Pelosis’ husband) are not traditionally insiders. The testimony they receive is by its nature public. That we’ve allowed lots of things that shouldn’t be secret doesn’t change that. That elected officials can be corrupted by their power isn’t an insider trading issue, it’s a corruption one.
  - lowbloodsugar 3y ago
    Sure. But the issue is when they have insider information on how a vote is going to go, when the vote impacts stock prices. She has material information that the public does not.
    - kasey_junk 3y ago
      But she's not an insider. The common belief is that insider trading laws are about having data that the market doesn't know. In the US that's just not the basis for the law. In the US there is no expectation that everyone has the same information when trading. The expectation is that people who have a duty to the shareholders are not trading on any non public material information. If you don't have a duty to the shareholders, it doesn't matter how you trade. Is that the appropriate standard to hold congress people to? I don't know, personally i think, no. But its not obvious that its incorrect from a legal point of view. What fiduciary duty does Nancy Pelosi have to some fund her husband owns? I'm good with a definition that says "once you become a congress person you have fiduciary duty to everyone" but thats not the law now.
      - lowbloodsugar 3y ago
        So if I’m a billionaire, I can say I’m going to buy a company, to build up its stock price, and then short it and publicly walk away? That’s fine because I don’t have a duty to that company’s shareholders? I mean sure, can only do it once, but that’s legal?
        kasey_junk 3y ago
        :shrug: it’s not insider trading (by historical norms) that doesn’t make it legal. There are other laws that you might be breaking.

wongarsu 3y ago

There's a sliding scale of accountability from "I did it", "My wife did it", "My fiance did it", "my significant other did it", "my neighbour did it" to "some person I don't know did it". A fiance is still close enough that they are captured by lots of regulation, because collusion/cooperation between partners is so common.

jandrese 3y ago
I feel like the SEC must have already taken into account the possibility of a "Strangers on a Train" situation where an insider tracks down an anonymous third party to commit the crime with the expectation of being paid back a percentage at some later date.
- kevinmchugh 3y ago
  There are convictions for golf buddies swapping tips. In the perfect strangers situation, the tip receiver has no incentive to ever pay back the tipper. There's no legal recourse
  - jandrese 3y ago
    Except the guy knows where you live and has already shown a willingness to break the law in ways where he thinks he won't be caught. If the top receiver suddenly finds himself dead there is nothing pointing back towards the original inside trader. This is the stuff of tawdry crime thrillers, but it's certainly not so far out of the realm of possibility that the SEC can just ignore it.

cmcaleer 3y ago

https://www.sec.gov/litigation/litreleases/lr-24375 https://www.sec.gov/litigation/litreleases/lr-24375 The case for those wondering.

bombcar 3y ago

Many financial laws consider spouses to be "identical" from the point of view of law. Since your wife would benefit from you acting insider knowledge she has, it applies.

foota 3y ago

is this not a breach of "other relationship of trust and confidence"?

jabroni_salad 3y ago

As a someone in scope of FINRA, yes actually. Your immediate nuclear family owes your company that duty and you have to grant your company's watchdog the ability to monitor your family member's investments for restricted trades. See also: I am not allowed to use robinhood at all because their referral program can reward you with a restricted security. Nobody was grandfathered and every RH user at my firm was told to xfer out or find a new job. I also can't use any roboadvisor. For us peons, independence is a serious matter. It's just the rich and powerful that get to flaunt it.