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Insider trade on Splunk acquisition?

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Re: Insider trade on Splunk acquisition?

#151

Post by conductr »

kypro wrote: post #120

I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…

Just like any crime, they can charge you with it if they think they should. We live in a time when scant circumstantial evidence , like the fact you randomly traded outside your pattern with exceptional timing , can be enough for a DA to charge you.

In this case though you’d probably have a good defense to those charges. It’s possible they’d interview you and look into it more and see this plainly before bringing those charges. If they did though, even with a good defense, it’s going to be disruptive to your life and finances.

The fact they were speaking about it in public and you have no connection to them makes it plausible for you to think that what you heard was public information. The onus is on them to protect sensitive information like this so they could actually face some problems. It’s very much going to vary by all the people involved with the investigation and what they want to do with it.

Re: Insider trade on Splunk acquisition?

#153

Post by mock-possum »

bragr wrote: post #130
kypro wrote: post #120

I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…

It's still not public information (e.g. "Material Nonpublic Information"). You can't trade on it. See 17 CFR § 240.10b5-1 "Trading “on the basis of” material nonpublic information in insider trading cases", particularly section (b) "Awareness of material nonpublic information." https://www.law.cornell.edu/cfr/text/17/240.10b5-1

A guy speaking out loud at a bus stop isn’t public information?

Re: Insider trade on Splunk acquisition?

#154

Post by hash872 »

kasey_junk wrote: post #133
kypro wrote: post #120

I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…

The SEC has recently been pursuing very expansive insider trading definitions, and they are occasionally losing, so it’s very hard to say. But traditionally in the US insider trading is not about market fairness, it’s about not stealing from shareholders. So if you have no obligation to the company or it’s shareholders you aren’t an insider. The phrase is “breach of a fiduciary duty or other relationship of trust and…

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....?

Re: Insider trade on Splunk acquisition?

#155

Post by pc86 »

fragmede wrote: post #132
kypro wrote: post #120

I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…

How many lawyer meetings with the SEC are you willing to sit through for $10M (5 after taxes)?

If I've got $5M to spend on attorneys, quite a few.

Re: Insider trade on Splunk acquisition?

#156

Post by pc86 »

euos wrote: post #127
kypro wrote: post #120

I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…

Burden of proof would be on FCC.

What do you think the FCC is?

Re: Insider trade on Splunk acquisition?

#157

Post by paws »

thathndude wrote: post #58
bryan0 wrote: post #49

Can someone explain the mechanics of this specific trade to a noob? The trader bought 550k options yesterday for SPLK to hit $127/share? Since that seemed highly unlikely they were only priced at $.04 each. but now that SPLK is at $145/share they are worth $18 each? so that would be a profit of ~$10m?

No explanation needed. You got it. An options contract gives you the right to buy or sell a security to a counterparty at a fixed price at any time on or before the expiration date. As you note, the chances of being able to buy a share from someone on or before Friday for $127 (when the stock was publicly trading below that) was near valueless ($.04). Not anymore!

Could you please explain more about who these counterparties are exactly? Do they include brokerages?

I'm trying to understand why a counterparty would enter into an arrangement where a stock price change obligates them to financial liability like this. Presumably there's some upside if the stock price goes the other way, but it's unclear who the $ would come from in that case.

Also: Who originates options? When someone buys an option, is it the brokerage who collects the fees? Is the counterparty already involved at that point?

Re: Insider trade on Splunk acquisition?

#158

Post by hotpotamus »

briffle wrote: post #139
hotpotamus wrote: post #124

Earlier quoted context omitted.

They could probably just tell the SEC, "I think you're a bunch of stupid doodooheads" and see how well that works.

Works great if your rich enough.. Maybe they will go private at $420 a share.....

I've been downvoted here before for telling people what Musk says SEC stands for. But this guy didn't make plutocrat money off the trade, so he should watch his back for sure.

Re: Insider trade on Splunk acquisition?

#159

Post by kasey_junk »

rs999gti wrote: post #50
scarmig wrote: post #12

Go directly to jail, do not pass go, do not collect $10M.

Unless they are a politician :/ https://blogs.luc.edu/compliance/?p=4459

You’ll note that opinion piece never actually outlines any special immunity from insider trading rules that Congress people have. What it’s really outlining is that the normal rules for insider trading aren’t enough for Congress people. Which is a reasonable position to take, but it’s not what the headline implies.

There is no special immunity for insider trading for Congress. https://www.everycrsreport.com/files/20170412_RS21127_36174d...

Re: Insider trade on Splunk acquisition?

#160

Post by pjmorris »

fragmede wrote: post #132
kypro wrote: post #120

I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition? 1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy? 2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's…

How many lawyer meetings with the SEC are you willing to sit through for $10M (5 after taxes)?

More than one?
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