I'm slightly disappointed that the question was only hypothetical.
Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
31–40 of 227 posts
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#32IANAL, but I don't see how. If you're just an ordinary person, you're trading based on an event you witnessed in the course of going about your life. No different I would think than if you witnessed a plane crash. You might be investigated though if the amounts were large enough. It gets much more complicated I would think if you were an air traffic controller or otherwise learned about it in a professional capacity.
I think it's mostly a joke, the original post is from Reddit r/WallStreetBets. But regarding Air Traffic controllers, it appears they are barred from owning airline stock https://www.law.cornell.edu/cfr/text/5/6001.104 (b)
That sounds like it's not really about insider trading but rather about quality of service and avoiding perverse incentives? So different entities don't get different treatment by ATC.
In particular note that the requirement is about lacking financial interests at all, not merely about avoiding trading.
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#33Earlier quoted context omitted.
As a random individual, almost certainly. I can do lots of (legal) things to ferret out information that is theoretically public but which isn't actually widely known. As an insider it's more complicated as I understand it. A company I worked for had a no trade window around earnings reports. The idea is that not only couldn't you trade on advance information but you also couldn't trade before investors had time to p…
IANAL but I imagine corporate policies are stricter than the law here. I have a hard time imagining people getting prosecuted for "insider trading" based on earnings reports half an hour after they become public, but trading windows still generally prohibit that.
You're right. Caesar's wife beyond reproach and all that applies.
Especially these days with computer algorithms, the idea that it might take a couple of days to price in an earnings report is pretty silly probably. (And if an employee knows a lot of dirty laundry behind the public numbers, an extra day or two probably doesn't make much of a difference anyway.)
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#34Earlier quoted context omitted.
Important clarification: you do not need to have confidentiality obligations with respect to the information or a fiduciary relationship, it need only be information that is material and non-public information that belongs to the company (i.e. only available to those with a fiduciary responsibility or confidentiality obligation to the company). If an insider with confidentiality obligations shares material non-public…
> it need only be information that is material and non-public. I think this is wrong as well. Suppose you are a independent technician repairing cars. Over time you notice, that, say BMW car quality used to be good but has gone to shit. That's not public information, but you would be allowed to short BMW stock in the hopes that, once public catches on, their share price will tank. In fact half the point of stock trad…
>I think this is wrong as well.
The gp's wording is a little confusing but he's just trying to explain the transitive logic of non-public information transferring from a "true insider" to an outsider is also "insider trading" and thus illegal. Think of it as the provenance of information coming from an insider.
E.g. Martha Stewart is an "outsider" and not an insider of drug company ImClone but she was found guilty of insider trading because she did get confidential information from insiders at the Merrill Lynch brokerage that handled stock trades for the ImClone CEO: https://www.sec.gov/news/press/2003-69.htm
Your scenario of a mechanic repairing cars, or somebody counting the number of cars in various Walmart parking lots, or a hacker that discovers a serious website vulnerability that may cause embarrassment and stock price drop ... none of those situations have a corporate insider in that information disclosure loop.
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#35Earlier quoted context omitted.
Important clarification: you do not need to have confidentiality obligations with respect to the information or a fiduciary relationship, it need only be information that is material and non-public information that belongs to the company (i.e. only available to those with a fiduciary responsibility or confidentiality obligation to the company). If an insider with confidentiality obligations shares material non-public…
What does "non-public" mean here? If some information gets leaked without authorization by an insider (like when people leak stuff online...), (when) does that become public?
There's no bright line. But jurisprudence puts it somewhere below 375 subscribers to a newsletter.
https://www.bloomberg.com/opinion/articles/2023-11-02/the-ba...
(Journalism Section)
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#36Earlier quoted context omitted.
Important clarification: you do not need to have confidentiality obligations with respect to the information or a fiduciary relationship, it need only be information that is material and non-public information that belongs to the company (i.e. only available to those with a fiduciary responsibility or confidentiality obligation to the company). If an insider with confidentiality obligations shares material non-public…
> it need only be information that is material and non-public. I think this is wrong as well. Suppose you are a independent technician repairing cars. Over time you notice, that, say BMW car quality used to be good but has gone to shit. That's not public information, but you would be allowed to short BMW stock in the hopes that, once public catches on, their share price will tank. In fact half the point of stock trad…
It's not insider trading to judge the quality of a product based on what you experience of the product in the wild and to make an investment decision accordingly. It's just being canny.
Now, if you learned from someone inside that they were going to do a recall but had not announced it yet, on the other hand...
That being said, I am sure that insider trading is widespread (e.g. above example). The thing is that is it not easy to detect unless you are already on the radar.
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#37Is it insider trading if you sold Microsoft stock short because Windows gave you a BSOD?
Clearly not. The question is only raised because airplane failures are much more rare than software failures.
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#38Isn't the practical answer: "it depends on which way the wind is blowing when the regulators or courts make their decisions"? If they want to get you for something, they will find a way.
Pretty much, no? Congress insider trade all the time and AFAIK they have not been reprimanded. It's OK for some to do it, but not others.
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#39This is a good opportunity to point out that insider trading is a victimless crime. If you sell stock with insider knowledge, you sell it to someone who would have happily bought it at the same price or possibly a higher price from someone else anyway. The same is true if you buy stock with insider knowledge. The only net effect of insider trading is to make the market more efficient by pricing in otherwise inaccessi…
If I work for Apple and I'm on the special secret new Apple Glasses project, I reasonably know that when the product is announced the stock is going to go up. That information belongs to Apple, not me. Apple could sell more shares to capitalize on the announcement. By buying shares before the announcement, I'm capturing some of the gain that should be Apple's.
If the company itself was to buy its own stock based on non-public information, wouldn't that also be insider trading? The corporate entity itself is, like, the ultimate insider.
Re: Is it insider trading if I bought Boeing puts while inside the wrecked airplane?
#40No, you're not a Boeing insider by sitting inside their plane; that's weapons-grade word semantic equivocation.