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Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

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Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#191

Post by resist_futility »

arthurcolle wrote: post #151
Retric wrote: post #129

Earlier quoted context omitted.

That’s not quite correct, it depends on the nature of the disclosure. Someone receiving information from an insider needs be independent of personal, financial, and quid pro quo relationships. So a random person that happens to sit next to a CEO on an airplane can trade on whatever they hear. The CEO’s mistress sitting on the other side of them can’t.

> So a random person that happens to sit next to a CEO on an airplane can trade on whatever they hear. I am under the impression that this would also be illegal, because trading on the basis of MNPI is itself illegal, irrespective of insider/outsider status.

How would a random person know if that information was MNPI? How could you possibly prove that someone knew it was?

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#192

Post by tomp »

arthurcolle wrote: post #151
Retric wrote: post #129

Earlier quoted context omitted.

That’s not quite correct, it depends on the nature of the disclosure. Someone receiving information from an insider needs be independent of personal, financial, and quid pro quo relationships. So a random person that happens to sit next to a CEO on an airplane can trade on whatever they hear. The CEO’s mistress sitting on the other side of them can’t.

> So a random person that happens to sit next to a CEO on an airplane can trade on whatever they hear. I am under the impression that this would also be illegal, because trading on the basis of MNPI is itself illegal, irrespective of insider/outsider status.

> because trading on the basis of MNPI is itself illegal

"yes" in Europe, "no" in the US

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#193

Post by aneryx »

dia80 wrote: post #91

UK rules differ from the US there is a 3-point test for insider trading: 1. The information has to be specific - Yes - you should sell Boeing 2. Would a reasonable investor take this information into account when making a decision to trade - Yes - this seems quite clear 3. The information must be non public - IIRC disclosure to a large group of people - in this case the perhaps 200ish people on the plane knowing it h…

So if this was a smaller plane with only 20 people on it, it could qualify as inside trading in the UK?

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#195

Post by xarope »

Someone explain to me why is this any different to HFT bots trawling the web and reacting in microseconds to any adverse "news" about Boeing?

("news", since I'm not in that industry and don't know if they only react to official media, unofficial media - aka blogs etc, tweets, etc)

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#196

Post by ojosilva »

Mtinie wrote: post #159
arthurcolle wrote: post #151

Earlier quoted context omitted.

> So a random person that happens to sit next to a CEO on an airplane can trade on whatever they hear. I am under the impression that this would also be illegal, because trading on the basis of MNPI is itself illegal, irrespective of insider/outsider status.

In the specific hypothetical case mentioned, wouldn’t that constitute “public” information if it was overheard in a non-controlled location?

Overhearing could fall under the "misappropriation theory" of insider trading. If you run into "confidential" (material non-public) information about the security, you still would be committing fraud. [1]

But then the passenger could claim that they did not the person next to them was Elon Musk, and that when Elon said over the phone "whoever shorts Tesla stock now will become a billionaire next month" they thought it was some random guy giving his 2c on the trade.

[1] https://www.law.cornell.edu/wex/misappropriation_theory_of_i...

> Before U.S. v. O’Hagan, 521 U.S. 642 (1997), individuals could only be liable for insider trading under the classical theory of insider trading. In U.S. v. O’Hagan, the U.S. Supreme Court faced a scenario where a partner at a large law firm purchased stock futures in a company conducting a tender offer based on inside information that he gleaned from other partners at the firm working on the deal. Although the partner had no fiduciary duty to the companies in whose stock he traded, the Supreme Court found him liable under Rule 10 b-5 on the grounds that he used confidential information to trade securities. The Court reasoned that such insider trading is fraudulent because it is akin to embezzlement; that is, the owner of the confidential information has exclusive use of such information, and the trader misappropriates that information by trading on it and not disclosing the use of the information to the owner of the information.

Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?

#199

Post by Retric »

ojosilva wrote: post #196
Mtinie wrote: post #159

Earlier quoted context omitted.

In the specific hypothetical case mentioned, wouldn’t that constitute “public” information if it was overheard in a non-controlled location?

Overhearing could fall under the "misappropriation theory" of insider trading. If you run into "confidential" (material non-public) information about the security, you still would be committing fraud. [1] But then the passenger could claim that they did not the person next to them was Elon Musk, and that when Elon said over the phone "whoever shorts Tesla stock now will become a billionaire next month" they thought i…

That partner had privileged access to that confidential information and as such wasn’t an unrelated 3rd party.

Where the ‘theft’ line of reasoning is an issue for unrelated 3rd parties is hacking: https://www.justice.gov/usao-edny/pr/former-hedge-fund-manag...

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