[HN Gopher] Is it insider trading if I bought Boeing puts while ...
___________________________________________________________________
Is it insider trading if I bought Boeing puts while inside the
wrecked airplane?
Author : wazbug
Score : 394 points
Date : 2024-01-27 17:41 UTC (5 hours ago)
(HTM) web link (law.stackexchange.com)
(TXT) w3m dump (law.stackexchange.com)
| shove wrote:
| lol no, but also ssshhhhhhhh
| ackbar03 wrote:
| My man you deserve every dollar you make from that trade
| ghaff wrote:
| IANAL, 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.
| judge2020 wrote:
| 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)
| dataflow wrote:
| 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_.
| pfdietz wrote:
| I more hope they're barred from _shorting_ airline stock. :)
| HWR_14 wrote:
| They're barred from trading anything the SEC regulates
| (including options and shorted stock) with regards to
| airline, airplane manufacturer or airplane part
| manufacturer stocks. There is an exception allowing them to
| indirectly own them (like through mutual/index funds).
| SilasX wrote:
| "But I did even _better_ than owning zero airline stock. I
| own a _negative_ amount!"
| SV_BubbleTime wrote:
| I would love to see congressional members and their families
| banned from the same.
|
| It's a big ask though. Where do you draw the line?
|
| So either that, or I can get Pelosi ETF.
| whycome wrote:
| Has someone done that? Created a virtual etf of pelosi's
| stocks?
| judge2020 wrote:
| Yes https://www.thestreet.com/etffocus/blog/want-to-
| trade-stocks...
|
| But there is a very high expense ratio.
| phkahler wrote:
| >> 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 even a Boeing employee would not be guilty. The event
| happened in public and it should make no difference since the
| non employee next to them would not be trading on insider info
| either. The information did not come from inside the company.
| antasvara wrote:
| >It gets much more complicated I would think if you were an air
| traffic controller or otherwise learned about it in a
| professional capacity.
|
| IANAL, but I am curious if ATC radio communications are
| considered public. My understanding is that it is legal to
| listen to ATC radio; if that's the case, is the plane crashing
| "public information" right after you relay the info over the
| radio?
| ghaff wrote:
| 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 price the results into the stock. In
| other word, you couldn't trade based on the results you knew
| were coming a microsecond after the results hit the wire.
| (The HFTs would probably beat you anyway but I digress.)
| dataflow wrote:
| 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.
| ghaff wrote:
| 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.)
| fbdab103 wrote:
| There was a legal case where the speed of light was used to
| identify insider trading. Information was publicly
| disclosed at (fake numbers) 12:00:00:001, yet trades
| benefiting from the information came at 12:00:00:002, which
| was faster than possible for the information to have been
| learned and acted upon by the involved parties.
|
| https://www.theverge.com/2013/10/3/4798542/whats-faster-
| than...
| dingaling wrote:
| > I am curious if ATC radio communications are considered
| public
|
| It varies by justification. In the UK it is illegal to
| monitor communications not intended for you ( Wireless
| Communications Act 1949 ).
| toast0 wrote:
| If you're an insider, my understanding is that it's not
| advisable to trade on material non-public information has
| become public immediately upon release. You need to wait for
| it to become widely dissemeniated. I've heard guidance of
| something like 2 business days after release, although that
| seems extra cautious.
| Ekaros wrote:
| Like if you were mechanic for the airline and got message that
| we will be landing with missing door. And then traded stock of
| airline on that information.
|
| Being in the crew of the plane might get more messy at least
| when done with airline. Boeing less so.
| fbdab103 wrote:
| This is the part which I find really sticky. What about all
| of the non-Boeing employees who interface with the equipment
| for their job?
|
| The pilot, flight attendants, air traffic control, EMTs, etc.
| They have no direction association with Boeing, yet you could
| make an argument it was part of their responsibilities.
|
| On the other hand, if your employer gives you X-brand
| wrenches, which frequently fall apart in your hands during
| routine operation, that seems like actionable information on
| which you would be justified to act.
| graphe wrote:
| Like all laws it's about enforcement. They can say whatever
| they want we know "insider trading" is a natural human
| response to information. Unless they can prove it was
| insider trading it isn't.
| Fezzik wrote:
| Original post from 16 days ago:
| https://news.ycombinator.com/item?id=38948827
| voakbasda wrote:
| Isn'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.
| cedws wrote:
| 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.
| eschneider wrote:
| It's not if you don't have a fiduciary duty to Boeing.
| tsimionescu wrote:
| That's not correct. If you trade on information tipped to you
| by insiders, you are also guilty of insider trading, even
| though you didn't have any fiduciary duty towards the company.
| pfdietz wrote:
| If you overhear insiders discussing something, say in a
| restaurant, you aren't an insider (and I believe there is
| case law on just that point). In general, you need to have
| encouraged or conspired with the leaker, if I understand
| correctly.
| ejb999 wrote:
| of course not - you are not an 'insider' if all you are as a
| customer with a bad experience - no different than you buying
| puts on restaurant where you think the food is terrible or even
| made you sick.
| cqqxo4zV46cp wrote:
| You're "insider" the airplane!
| KieranMac wrote:
| No, it is not. If you do not have a fiduciary relationship with
| Boeing and you have no confidentiality obligations with respect
| to the information, you are not trading on inside information. If
| you're in the plane when the door blows up, you're just the first
| person with material public information. You're not trading on
| material non-public information.
|
| See, e.g.
|
| https://www.law.cornell.edu/wex/misappropriation_theory_of_i...
| arsome wrote:
| This is just news trading, you're just really fast because
| you're the headline.
| labrador wrote:
| I love answers like this because it clears up confusion in few
| words and makes the answer obvious in retrospect
| abm53 wrote:
| It's often a dangerous kind of answer.
|
| I once saw somebody say something to the effect that in every
| Hacker News thread, there is always a highly upvoted comment
| that sounds completely plausible, well argued, made by
| somebody who appears highly qualified to answer, and that is
| completely incorrect.
|
| I don't think it's always true, but it often is.
| SoylentOrange wrote:
| Unfortunately in this case the answer as written is
| completely wrong. See the top reply.
|
| > If you do not have a fiduciary relationship with Boeing and
| you have no confidentiality obligations with respect to the
| information, you are not trading on inside information.
|
| Specifically this part. One of the first things you learn
| when doing mandatory insider trading training is you can
| easily run afoul of the law if you act on non-public info you
| overheard, or happened to see by accident, even if it has to
| do with some company with which you are not affiliated. A
| common example is you're in a coffee shop and see an upcoming
| earnings report on someone else's laptop screen, then trade
| based on that information.
| labrador wrote:
| The top reply currently for me is colinmorelli who says:
|
| > in this particular case is no, it's not insider trading
|
| You seem to be saying it could be, but that wouldn't mean
| the answer was "completely wrong" (your words)
| SoylentOrange wrote:
| The reasoning is totally wrong and while "no" is likely
| correct it's more of a stopped clock sort of situation
| colinmorelli wrote:
| 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
| information with a person who has no confidentiality
| obligation, and that person trades on that information, that
| would be insider trading.
|
| The link you referenced also clarifies this point, but it is
| different from what is written in your comment.
|
| Note: this doesn't change the fact that the answer in this
| particular case is no, it's not insider trading. You are, as
| parent mentioned, just the first to know the news.
| dataflow wrote:
| 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?
| bwilliams18 wrote:
| 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)
| ClumsyPilot wrote:
| > 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 trading if for you to do
| research, including your own investigation and testing. And
| then use that as an advantage. In the process you are
| bringing the price close to it's true value.
|
| P.S. nothing against BMW, just an example.
| ghaff wrote:
| Just because Car and Driver hasn't published an expose
| doesn't mean the information isn't public. Presumably lots
| of other independent (and non-independent) technicians have
| noticed the same thing. Your observation may be sampling
| error or not something that is sufficiently noteworthy to
| have percolated up to all the car forums out there en
| masse.
| colinmorelli wrote:
| "Public" doesn't mean the company has publicly announced it
| - just that the information is available to the public. The
| situation you're describing is very similar to the Boeing
| situation above. You just happen to be the first person
| aware of the news, because your job provides you the
| ability to see a bunch of cars and understand how their
| quality is trending. Nor is it any different than you
| buying, say, one of the first Rivans, thinking the QC was
| horrible, and shorting the stock.
|
| Regardless of when you learned it, the quality of BMW's
| cars (in this example) became public information when they
| started selling them to the public.
|
| Now, however, if an internal employee told the technician
| that BMW had removed all QA checks from their line, and
| (s)he should expect quality to fall precipitously in the
| years ahead, that would be different.
| jasode wrote:
| _> 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.
| colinmorelli wrote:
| Slightly clarified my comment via a parenthetical. "Non-
| public" in this context refers to information which would
| only be available to those with a fiduciary
| responsibility and/or a confidentiality obligation to the
| organization.
|
| I was trying to avoid the use of "insider," because
| people tend to assume that means employees or directors,
| but that is not the case. Outside organizations who have,
| as an example, signed an NDA with the organization may
| learn of material non-public information, and trading on
| that could constitute insider trading.
| nightpool wrote:
| > "Non-public" in this context refers to information
| which would only be available to those with a fiduciary
| responsibility and/or a confidentiality obligation to the
| organization.
|
| Right, but information available to those with a
| confidentiality obligation can still be traded on if
| acquired legally. That's the crucial point. It's not
| enough for it to be non-public and material, you must
| also be in breach of a fiduciary duty (or acting in
| concert with somebody who is). For example, if a Boeing
| CEO was at a coffee shop discussing an upcoming
| acquisition at the table next to you, you'd be able to
| trade on it, even though it was confidential information
| not available to the general public and obviously
| material to Boeing's stock price.
| colinmorelli wrote:
| It's not required - to my knowledge - that specific
| person disclosing the information be in breach of a
| fiduciary duty, as one could easily overcome that by
| disclosing to someone who discloses it to someone else,
| who then trades on it.
|
| The scenario you mentioned is generally understood to be
| permissible, but it's not exactly clear to me why.
| Perhaps that the information became "public" (whether
| intentional or not) when discussing it in a public forum
| such as a coffee shop?
| ipaddr wrote:
| If she put it on twitter could she legally trade on the
| tip? If I saw the tweet and trade is that legal?
| Someone wrote:
| > If she put it on twitter could she legally trade on the
| tip?
|
| IANAL, but if she traded a picosecond after tweeting: no.
| If she has zillions of followers and traded a year later:
| yes, because 'the public' could be aware of the content
| of the tweet. A judge will have to decide on in-betweens.
| When doing that they likely will take into account how
| open Twitter/X is.
|
| > If I saw the tweet and trade is that legal?
|
| Again, IANAL, but I would think so, if she has 'enough'
| followers.
| injb wrote:
| >> Martha Stewart is an "outsider" and not an insider of
| drug company ImClone but she was found guilty of insider
| trading
|
| Minor correction: she was not convicted of insider
| trading. That charge was dismissed. She was only
| convicted of lying to investigators.
| bhk wrote:
| I can't find any evidence that she was ever charged with
| insider trading.
|
| The judge dismissed a charge of "securities fraud", which
| claimed that she had defrauded investors in her own
| company by making false statements to the public.
|
| The jury convicted her of "false statements",
| obstruction, and conspiracy.
| ada1981 wrote:
| I'm curious about trading on your supply chain partners.
|
| Can Apple buy stock in a chip manufacture before they
| sign a deal with them?
|
| Can they short them before not renewing a contract?
|
| Another way of asking, is trading other companies based
| on insider knowledge from your company legal?
| teo_zero wrote:
| No, no, and yes.
| mytailorisrich wrote:
| 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.
| raverbashing wrote:
| This is not "non public" information and to be honest it
| might not even be material
|
| "Non public" usually means an information that's internal
| to the company, not necessarily something that can't be
| gathered independently
|
| Google's menu for the week in their offices is "non public"
| but not material information
| jack_pp wrote:
| Seems to me the technician does have public information, he
| is not the only technician that has that data he might just
| be the only wise enough to notice the pattern
| victorbjorklund wrote:
| This is not insider information you got from the company.
| You just observed the world. Totally allowed. What would
| not be allowed is if you got hold of info from BMW that
| showed way more repairs than previously reported etc (and
| it was material for the company).
| paulsutter wrote:
| You're muddying the waters here, the original poster is
| correct, but with a few scenarios for outsiders. For example,
| a company that printed the financial statements of companies,
| had no NDAs, was trading on the data, and was convicted of
| insider trading because they knew the data was company
| confidential information.
|
| Theft from the company is the central tenet, whether you are
| an insider, have a fiduciary responsibility, or an outsider
| who comes across data from inside the company.
|
| Material nonpublic information that isn't taken from the
| company is fair game, thus all the quant funds that collect
| detailed market intelligence and trade on it (or the posted
| example, a passenger on the plane who knew the news ahead of
| the public). It doesnt matter one whit whether the
| information was material or public, it matters only that it
| wasn't taken from Boeing
|
| EDIT: I was involved in the early days of a company that sold
| data to quant funds, and spent many hours with lawyers on
| exactly this question
| colinmorelli wrote:
| It does seem quite odd to say "it doesn't matter one whit
| whether the information was material or public" when
| insider trading is defined as: the trading of a company's
| securities by individuals with access to confidential or
| material non-public information about the company.
|
| Further, I struggle to understand how one could learn
| information which is non-public without "theft" of that
| information. It would seem that, by definition, if the
| organization begins sharing that information with
| individuals who have no confidentiality obligation, they
| have now made that information public.
|
| What does tend to happen often is that others assume
| "public" means "written in the news" and that is certainly
| not the case. There are plenty of things that are knowable
| by the public but not obvious, and it's perfectly fine to
| trade on that.
| paulsutter wrote:
| You're thinking too narrowly.
|
| Example: logs of search queries that suddenly trend with
| adverse information about companies. Those logs are not
| public, in fact you need to buy them, but they have real
| signal (thus material and nonpublic), and are perfectly
| legal to buy and use. Satellite photos to estimate
| material stacking up outside a factory, or how many cars
| are in the parking lots of retail stores. Mobile data
| that has been statistically tied to foot traffic in
| stores. Credit card purchase data (not public! very
| material! perfectly ok!) I could go on forever
|
| Go ask a lawyer this is a big space
|
| EDIT: Yes exactly, ITS HAS TO BE CONFIDENTIAL TO THE
| COMPANY AND THUS TAKEN FROM THE COMPANY LIKE I SAID
| ABOVE. Your explanation implicated all the cases I
| described. You haven't seen how explicitly rich are the
| sources that I mentioned above, they are very very
| definitely information about the companies that are
| traded
| colinmorelli wrote:
| My explanation did not implicate the cases you described
| above, because it explicitly said "only available to
| those with a fiduciary responsibility or confidentiality
| obligation to the company"
|
| Regardless of the level of fidelity, if you got that
| information from an unaffiliated third party entity who
| captured it in the delivery of their own services, it is
| not "only available to those with a fiduciary
| responsibility or confidentiality obligation to the
| company"
|
| It sounds like we are saying the same thing and you don't
| feel my original comment was clear enough. That's fine
| feedback. But there's no substantive disagreement. The
| points you listed above are all fine to trade on.
| sokoloff wrote:
| You're missing a clause in what constitutes illegal
| insider trading. From an SEC site:
| https://www.investor.gov/introduction-
| investing/investing-ba... (italics added by me)
|
| > Illegal insider trading refers generally to buying or
| selling a security, _in breach of a fiduciary duty or
| other relationship of trust and confidence,_ on the basis
| of material, nonpublic information about the security.
| colinmorelli wrote:
| My statement was copied from Cornell Law's definition
| [1].
|
| But, yes, all of these shorthand definitions are designed
| for the general public's consumption, and skip over
| specific nuances - including the SEC's definition. The
| sentence read above would seem to permit a person with a
| fiduciary duty to share information with someone who does
| not have one, and for that person to trade based on the
| information. However, we know this is not permitted.
|
| In any case, I think my comment still stands. I
| specifically called out in my parenthetical in the
| original comment that the information would need to be
| knowable only by those with a fiduciary or
| confidentiality obligation to the company. This seems to
| cover your comment and sibling's concern.
|
| [1]: https://www.law.cornell.edu/wex/insider_trading
| HWR_14 wrote:
| > or an outsider who comes across data from inside the
| company
|
| Doesn't it matter how you came across that data? If you
| were at a coffee shop and happened to overhear a bunch of
| Boeing engineers talking about how they were replacing
| bolts with hot melt glue I thought you could you trade on
| that. If they explicitly told you that they were replacing
| the bolts with hot melt glue, then you wouldn't be able to.
| pama wrote:
| Unless you shad signed an NDA that stated they would not
| disclose non-public info and then told you about the
| glue, in which case you could still trade on it.
| porphyra wrote:
| What if you are on a plane and door blows out but the only
| other passenger on the plane happens to be a Boeing exec by
| sheer coincidence?
| colinmorelli wrote:
| Anyone could have been on that plane provided they bought a
| ticket. The fact that nobody else was is irrelevant. The
| information was not only knowable to those with a fiduciary
| or confidentiality obligation to the company.
| devortel wrote:
| If you're traveling as a regular passenger, you still would
| not have a fiduciary relationship with Boeing and you have
| no confidentiality obligations regardless of who else is on
| the plane.
| vintermann wrote:
| I know what you're thinking, but no, you still can't push
| him out.
| rezonant wrote:
| Ayyoooo
| adrr wrote:
| What if you infer it from a person that does have a privilege
| position.
|
| Here's the scenario. During acquisitions, acquiring company
| sometimes use market research companies to reach out to
| former execs at the company as part of their diligence.
|
| Can you trade long if you just receive a bunch of requests
| from market research firms but never actually talk to the
| acquiring company?
| ls612 wrote:
| Depends on how well connected you are to the establishment
| whether a prosecutor would try to bring charges on more
| novel fact patterns. Rule by law vs rule of law and all
| that.
| helsinkiandrew wrote:
| If you infer it, rather than being told by the research
| company then it's probably on the "not" end of the "insider
| trading" spectrum. The SEC could still charge you but it
| would be hard to prove how you inferred the information
| WoahNoun wrote:
| There's an ongoing insider trading case where an executive
| at Company A learned that Company A by might acquired. He
| then bought call options on his closest competitor assuming
| that the news of Company A being acquired would cause the
| value of the competitor to also increase.
|
| https://corpgov.law.harvard.edu/2023/12/17/sec-defeats-
| summa...
| Retric wrote:
| 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.
| jeffbee wrote:
| This exact scenario happened to me. I was flying United
| business class SFO to EWR and the guy next to me was
| writing a Powerpoint slide in 9000-point bold type "BUY XYZ
| CORP FOR 880 MILLION" and when I got to work a few hours
| later our counsel advised me that it was not at all
| improper to trade on that information, which we did.
| flipbrad wrote:
| The absolute first thing I ever do when publicly working
| on a doc like that (if I absolutely must) is Ctrl+r any
| trademarks, swapping them for [#x].
| jeffbee wrote:
| Seems good. But I also feel like if you're the kind of
| person who can command the disposition of a billion
| dollars, just stop writing slides. Stand up in front of
| the board and say what you came to say and then sit back
| down.
| evan_ wrote:
| Well, I've figured out how I'm spending my spring break-
| buy a ton of cheap stock in some random startup, dress
| head-to-toe in Microsoft swag, and then spend a few days
| hanging out in various SFO lounges working on fake
| PowerPoints declaring intent to buy the startup
| jeffbee wrote:
| Sounds fun. You'll also need to hack your photograph into
| the "about us" page of a major corporation, though.
| modeless wrote:
| ... but did you make money on it?
| arthurcolle wrote:
| > 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.
| Mtinie wrote:
| In the specific hypothetical case mentioned, wouldn't
| that constitute "public" information if it was overheard
| in a non-controlled location?
| resist_futility wrote:
| How would a random person know if that information was
| MNPI? How could you possibly prove that someone knew it
| was?
| mrb wrote:
| " _If you do not have a fiduciary relationship with Boeing_ "
|
| Ok so what if you are a Boeing executive or engineer on said
| flight?
| adrr wrote:
| Better question can the flight attendant buy puts? What about
| the air traffic controller who handled the emergency? It's the
| exact same information.
|
| This is where insider trading rules just don't make sense.
| Here's a good example. You can buy credit card data from
| Bloomberg that will give you near accurate information on
| revenue. For earnings, you can pay to see if a company will
| meet expectations and trade off that information. If you work
| for the company, it's insider trading. If you work for the
| credit card companies and get the same info and trade on it, it
| is also insider trading.
|
| Maybe we should make insider trading, trading off information
| that isn't public.
| kortilla wrote:
| >Maybe we should make insider trading, trading off
| information that isn't public.
|
| This is stupid. It disincentivizes people who make a living
| externally auditing/investigating companies
| Supermancho wrote:
| > This is stupid.
|
| Why? Trading implies making stock trades based on non-
| public information. This has little to do with auditing and
| investigating, since that information is not necessarily
| public.
| zymhan wrote:
| This wasn't a question being posed to HN readers, it's a
| StackExchange post.
| tester756 wrote:
| It's is just a meme
| philwelch wrote:
| This 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 inaccessible information.
| kevinmchugh wrote:
| 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.
| HPsquared wrote:
| 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.
| filoleg wrote:
| That's why companies like Apple have very strongly enforced
| rules related to this for their employees, like blackout
| windows on trading AAPL shares and not allowing them trading
| AAPL shares at all. And there are even more restrictions for
| those working on certain teams and in certain areas (e.g.,
| finance/accounting). Buying/selling right before the big
| announcement or earnings reports is straight up not allowed.
|
| I don't know the actual dates for Apple (as I only have
| friends working there, I haven't worked there myself, and I
| didn't quite care to ask for the exact length of trading
| blackout windows). But I know for a fact myself that at
| Google you get a trading blackout window that starts around
| 3-4 weeks before the quarterly earnings announcements and
| ends around a week or so after. And you are not allowed to
| trade GOOG options at all while an emlpoyee, not even outside
| of those trading blackout windows. There are additional
| blackout windows as well, but that's beside the point, and I
| don't remember them off the top of my head. And that's just
| for a run-off-the-mill software engineer working on an
| internal infra product that isn't some super-top-secret
| thing.
| cozzyd wrote:
| Or if you are in a position where you can sabotage it somehow
| (introduce a bug in an update that calls the HCF
| instruction)...
| philwelch wrote:
| An employer should be (and AFAIK is) free to contractually
| obligate you not to front-run their own trading strategies.
| There's no need for a federal criminal statute that, as far
| as I can tell, isn't even primarily motivated by this use
| case.
| MichaelNolan wrote:
| That might be true in some abstract sense, but it sets up some
| really perverse incentives. No one, especially investors, wants
| to legalize insider trading.
| filoleg wrote:
| > This is a good opportunity to point out that insider trading
| is a victimless crime.
|
| It is a "victimless crime" in the same sense as selling someone
| a house is, fully knowing that a pipe in the basement is going
| to burst 6-12 months later and not disclosing it to the buyer
| (which would've made the house value go down, if the buyer knew
| it).
|
| That "someone who would have happily bought it at the same
| price or possibly a higher price" is someone who wouldn't have
| done it, knowing what the insider knows, they would've waited.
| And the same is true for "insider knowledge that is related to
| something good about the company that's going to happen soon
| and pump the share price", you wouldn't sell your shares for as
| cheap as they are if you knew what the insider knows.
| gpderetta wrote:
| The ridiculous thing is that selling an house without
| disclosing known effects is perfectly legal in England
| (caveat emptor) as long as you didn't lie if specifically
| asked. I.e. you do not have to volunteer the information.
| philwelch wrote:
| > That "someone who would have happily bought it at the same
| price or possibly a higher price" is someone who wouldn't
| have done it, knowing what the insider knows, they would've
| waited.
|
| If you are the prevented from selling a particular house
| without disclosing some fault in the house, the buyer is
| prevented from buying that particular house. On the other
| hand, if I am aware of some fault in Apple Inc. and am
| prohibited or prevented from selling my AAPL shares, the
| buyers whom I would have sold to will not only still buy AAPL
| shares from someone else, they will likely pay a higher price
| for them!
|
| Again, if the law required corporations to publicly reveal,
| as soon as possible, any and all insider information that may
| potentially influence the company's market valuation, that
| would be one thing. Instead, not only are they not required
| to do that, but the information is not even allowed to leak
| out onto the markets in the form of insider sales which would
| depress the stock price and tip off investors that, even if
| they don't know exactly what it is, that something is wrong
| with the company.
| cedws wrote:
| I've been thinking about building a system that would enable me
| to quickly react to black swan events like this should they
| happen around me in daily life. The problem is that most of my
| funds are in savings accounts that take 1-2 business days to
| withdraw from, so I'd have to keep them in accounts that are
| faster to access.
|
| Also, this information that the passengers had in advance could
| have been worth millions in the right hands. If you had
| information like this, how could you quickly find parties
| interested in buying this information or giving you a share of
| potential gains?
| clbrmbr wrote:
| Verification of time-sensitive rare events from strangers is
| hard. But I can see how that could really increase your
| potential winnings.
| barbazoo wrote:
| Why would it be it's public information at that point.
| zilti wrote:
| I'm slightly disappointed that the question was only
| hypothetical.
| charlieyu1 wrote:
| In 2017 someone bought put options of Dortmund football team
| and bomb the team bus. I guess the circumstances are slightly
| different.
| pavlov wrote:
| Is 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.
| mathiasgredal wrote:
| Well, if I found an unpatchable zero-click RCE exploit on an
| iPhone, then that would have a major effect on the stockprice
| when the news is announced. It definitely seems like it would
| be insider trading if i used that knowledge to do options
| trading.
| patmorgan23 wrote:
| Only if you were an employee of apple (or one of its vendors
| working on the iPhone).
|
| If you independently discovered it, any other member of the
| public could have discovered it (assuming they had the skills
| and time).
| pavlov wrote:
| This is basically how professional short sellers like
| Citron Research and Muddy Waters work.
|
| They spend months doing research and if it's promising they
| first build their short positions, then publish the
| research. Often just being targeted by these famous short
| sellers will crash the stock. But it's not insider trading
| because their research was independently sourced.
| kazinator wrote:
| No, you're not a Boeing insider by sitting inside their plane;
| that's weapons-grade word semantic equivocation.
| alexwasserman wrote:
| Matt Levine covered this well too: https://archive.is/Kd6Os
|
| The answer being no, because as a consumer you have no duty of
| confidentiality.
| SV_BubbleTime wrote:
| It's a better question to see if it meets colloquial
| definitions of arbitrage.
|
| It's an advantage only a few people have, and you paid
| something in order to be put in that position.
| alexwasserman wrote:
| You paid to be in the plane. I doubt anyone paid specifically
| to be in a plane with the hope that a door would blow off to
| take advantage of information asymmetry in the aircraft
| manufacturer's stock (or the airline's stock).
| intrasight wrote:
| What if in the fine print of your ticket purchase was an NDA
| clause?
| whycome wrote:
| Now you're gonna have terms like that on your next ticket.
|
| And you'll get charged a fee for the privilege.
| jowea wrote:
| IANAL and it depends by jurisdiction but I don't you can
| stick whatever you want in those sort of shrink-wrap
| contracts. And according to this site[1] there's at least one
| (Finland) where surprising terms specifically are not
| allowed.
|
| [1] https://www.dlapiperintelligence.com/goingglobal/intellec
| tua...
| kristianp wrote:
| "if you are just a regular person and you go to McDonald's and
| buy a burger and say "this burger tastes bad, I'm gonna short
| the stock," that's fine, that's legitimate research. ... People
| are supposed to go around observing companies' products and
| services, evaluating them, and incorporating those evaluations
| into their investment decisions. That's how stock prices become
| efficient and how capital gets allocated to good uses rather
| than bad ones."
| shusaku wrote:
| This is literally posted in the 2nd answer of the link...
| alexander2002 wrote:
| Is it insider trading if i bought Tesla puts while inside the
| wrecked tsla ? Seems the intituive answer is no.
| LASR wrote:
| Of course not. I could see the airplane lose a door in the sky
| and immediately short airline stocks.
|
| But so can anyone really. People watching all this have no
| control over the door actually falling off.
|
| Insiders have the ability to shift the course of the company. So
| the reason why we have this law is so that insiders don't short
| their own stocks and then run the company into the ground, making
| guaranteed profits from that at the expense everyone else.
| supportengineer wrote:
| Someone is going to write a trading bot that scans worldwide ADSB
| data, looking for sudden, unexplained altitude changes - Identify
| the airline and equipment type and short them both. Assuming this
| doesn't exist already.
| SV_BubbleTime wrote:
| I've long thought that the airlines have systems that was
| sports leagues. That when team A is out of the running or team
| B makes it to championship that the price of tickets to or from
| are automatically adjusted m.
| gnicholas wrote:
| I recall learning in law school that "if there is no tipper there
| can be no tippee". In order for there to be a tipper, the person
| has to have an intent to provide a tip improperly. Imagine
| there's a CEO talking in an obscure foreign language in his own
| backyard, to a colleague on the phone, he is not a tipper -- even
| if someone who happens to speak that obscure language is walking
| by his fence at that moment. As a result, that person cannot be a
| "tippee" because there was no tipper in the first place.
|
| I'm not sure that not being a tippee means you're completely in
| the clear, since you have material information. But it's
| presumably not non-public information since hundreds of people
| know it, and thousands more are finding out by the minute.
| Johnny555 wrote:
| >Imagine there's a CEO talking in an obscure foreign language
| in his own backyard, to a colleague on the phone, he is not a
| tipper
|
| Is that actually true? I could believe it if he were speaking
| in a cryptographic code, but even an obscure language has more
| than one speaker so he shouldn't be revealing corporate secrets
| where he can be overheard even if he's speaking a foreign
| language.
| s0rce wrote:
| Apparently there are a few languages with only 2 speakers
| left, so I guess in that case its true.
| gnicholas wrote:
| Technically he wouldn't be a tipper (vis a vis the stranger
| on the other side of the fence) even if he were speaking
| English. To be a tipper one has to have intent to share the
| information inappropriately. I only included the language bit
| to make it clear he was taking some level of precaution, and
| had a reasonable expectation that he was not spreading the
| information around. Even carelessness does not make one a
| tipper vis a vis a stranger, IIRC. But it's been a couple
| decades since law school, so I could be wrong, laws could
| have changed, etc.
| clbrmbr wrote:
| Hmm. So a rouge Meta employee could put a barometric pressure
| monitor in Messenger or WhatsApp (that people use even without
| paid in-flight wifi) to detect depressurization and automatically
| short the airline and aircraft manufacturer.
| loeg wrote:
| This would probably be violating the employee's fiduciary duty
| to Meta.
| MichaelBurge wrote:
| But Meta the company could short the stock, and run a trading
| team using the information. It might be unwise because of bad
| PR, though.
| loeg wrote:
| Yes, exactly.
| wheybags wrote:
| They wouldn't have to be rouge, they could be any colour really
| s0rce wrote:
| Most phones got rid of the barometers.
| anonu wrote:
| Complicated. You could just monitor commercial flights that
| take off and return to the same spot shortly after
| whycome wrote:
| But they could do it under the guise of a distributed
| barometric weather station system.
|
| ....which actually kinda seems doable
| np_tedious wrote:
| HN of a stack exchange of a reddit
|
| (special shoutout to Money Stuff)
| bdcravens wrote:
| I wonder if the same would be true of the media that learn of
| events before they are publicized.
| bfung wrote:
| The actual article was from Reddit's r/wallstreetbets , where any
| excuse to post meme trades goes. Go read for fun.
| BMc2020 wrote:
| Ctrl-F _Casino Royale_
|
| _During the film, the terrorist financier Le Chiffre uses a
| Ugandan warlord 's money to short-sell stock in Skyfleet, thus
| betting the money on the company's failure. The banker plans to
| bring about said failure by destroying the company's prototype
| airliner. After his original bomb-maker is killed by James Bond
| in Madagascar, another is hired to complete the job. The bomb-
| maker infiltrates Miami International Airport and steals a fuel
| tanker; attaching a keyring-sized bomb to the vehicle. As he
| attempts to blow up the prototype with the truck he is
| intercepted by 007 and a fight ensues on-board. Eventually the
| terrorist is forced from his vehicle and Bond narrowly prevents
| the truck from colliding with the plane. With his plan foiled, Le
| Chiffre is left with a major financial loss and is forced to set
| up a high-stakes poker tournament at Casino Royale in
| Montenegro._
| jihadjihad wrote:
| > is forced to set up a high-stakes poker tournament at Casino
| Royale
|
| And take a long pull from that inhaler of his.
| loceng wrote:
| Huh, so sabotage of a flight on a plane where it's very
| plausibly related to ongoing quality control is a viable method
| of generating profit without suspicion - so long as the
| mechanic who sabotaged door to low off isn't the same one
| making playing the stock?
| klyrs wrote:
| I still don't think it counts as insider trading if an
| outsider sabotages the airplane and buys the puts. The
| sabotage itself is probably a dozen federal offenses (gasp,
| terrorism!) resulting in actual prison time; insider trading
| only gets a slap on the wrist.
| loceng wrote:
| Agreed, it wouldn't be insider trading - just fraud - with
| potential horrible unintended but predictable consequences;
| of which the person(s) buying the stock around that
| orchestrated event happens would be complicit in.
|
| There's probably far easier and more lucrative ways for
| clever criminals to execute on though.
| wiether wrote:
| _the sweet tang of_ insider trading
| curiousgal wrote:
| I would expect the answer to depend on the jurisdiction, Insider
| Trading is defined differently in US Vs other countries.
| alkonaut wrote:
| The interesting case of this question is mentioned in the
| comments to the question but not answered: what if you are the
| Boeing CEO, you have a ton of stock, and you are on the flight.
|
| Would it be insider information to tell your broker to sell
| evrything before the plane lands?
|
| It's information about your company not known by the (wider)
| public but it's also not information that it's your job to
| protect or that you have any special access to? So if I
| understand correctly, it wouldn't be insider trading in that case
| either?
| kosievdmerwe wrote:
| If you're the CEO you're likely not allowed to trade this
| readily, no matter your reason. High-level execs tend to have
| to pre-declare sales and purchases months in advance.
| skynetv2 wrote:
| This is clearly public information, it is not sensitive or
| restricted to the people with relationship with Boeing who are
| privy to this information.
| dia80 wrote:
| 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 had a problem would probably count as the
| information being public and thus this test is not met and you
| are free to trade - I think the bar is around 30 people
|
| I knew all those hours spent in compliance training would come in
| handy one day!
| Dracophoenix wrote:
| On that third point, what if the plane was privately-owned or
| chartered?
| user_7832 wrote:
| That's when you start counting the radio call to the tower +
| whatever other pilots are there in the area to hit the golden
| 30.
| quickthrower2 wrote:
| On the plane you can see the hole in the side. That is more
| of a signal to sell than a mayday alone. Maybe.
| yieldcrv wrote:
| The fourth point, which most comments seem to be missing: would
| a court and appeals court take that same stance?
|
| here in the US, quoting statutes on this topic is not useful
| because we also don't have a specific statute, we have a couple
| of general fraud statutes that the regulator has contorted
| itself to fit scenarios in
| m3kw9 wrote:
| You don't work for that company so it only means you for the news
| the fastest.
|
| Even if you worked for Boeing, it is public news as soon as it
| happened. You just happen to know it the fastest. Pure alpha
| worble wrote:
| "Also can someone please answer fast as we are descending very
| quickly"
| ijhuygft776 wrote:
| just dont tell anyone about it. /s
| jedberg wrote:
| Of course not, because you learned the information yourself as an
| outsider.
|
| Just like the hedge funds that pay for satellite images of all of
| the WalMart parking lots in the country and count the cars to
| estimate year over year sales. It's information they have that no
| one else does, but they didn't get it from an insider.
| pcthrowaway wrote:
| The real reason Walmart allows car campers to sleep in their
| parking lots...
| ehsankia wrote:
| Exactly. It's literally called "insider trading". There's
| nothing "insider" about an customer discovering something about
| the company's product while using it. The source of the
| information was not from "inside" the company.
| francisofascii wrote:
| But the customer was literally "inside" the problematic
| plane. :)
| permo-w wrote:
| this seems really obvious. you're not an insider if you're ...
| not an insider? how is this question even being considered
| charlieflowers wrote:
| If members of Congress can make millions trading on info they get
| from sitting on key committees, then trading based on your first
| hand experience certainly should be ok.
| ponector wrote:
| But you know that law applies differently to poor people and to
| wealthy and powerful people?
|
| Whatever is ok for congressman could not be ok for you.
| quickthrower2 wrote:
| True but that goes beyond "is it illegal" to "will I be
| prosecuted for...".
|
| Interestingly here I reckon even if illegal it is a bad look
| to go after a survivor of this.
| amelius wrote:
| Is it insider trading if I bought Apple puts right after an auto
| update that crashes my phone?
| BurningFrog wrote:
| Trading on your phone outdoors is always safe!
| choeger wrote:
| A hacker news post to a stack exchange question copied from
| reddit? At some point we might simply fuse these networks into
| one, don't we?
| quickthrower2 wrote:
| No! I like the firewalls between these networks thanks.
| zaat wrote:
| It can be more complicated, what if you are the pilot?
|
| > On August 15, 2006, it was revealed that Halutz sold off his
| investment portfolio three hours after two Israeli soldiers were
| captured by Hezbollah during the Zar'it-Shtula incident, leading
| to the war. While this action on the part of the chief of staff
| is technically legal and is only restricted (through blind
| trusteeship) from cabinet members, the State Comptroller Micha
| Lindenstrauss has called to expand it to the chief of staff and
| to other senior officials. Several Knesset members called for
| Halutz to offer his resignation and some members of the General
| Staff Forum commented that his resignation appeared inevitable
|
| https://en.wikipedia.org/wiki/Dan_Halutz#Investment_portfoli...
| machomaster wrote:
| It's weird that nobody mentioned Hijack miniseries with Idris
| Elba yet.
| vpribish wrote:
| because that's fiction?
| IAmGraydon wrote:
| Of course it's not insider trading. My question is how did this
| make it to the top of the HN front page? It reads like something
| you might see on WallStreetBets.
| emi2k01 wrote:
| You're right, that's the original source of the question
|
| https://www.reddit.com/r/wallstreetbets/comments/1935frs/is_...
| quickthrower2 wrote:
| Top reply: crash was priced in before takeoff!
| pricees wrote:
| I remember reading that a journalist dig into some gossip about a
| business found there to be credible evidence of malfeasance, sold
| the stock short, published the article, and was convicted of
| insider trading. I cannot find any of the details, but I recall
| reading this somewheres. Insider trading is whatever the govt
| said it is, which is why Martha Stewart went to jail, and walk
| street bankers just pay fines.
| jbverschoor wrote:
| Im not sure how much more inside someone could be
| vpribish wrote:
| no. this is a clickbait, bullshit, question that's been making
| the rounds of social media for weeks. You'd think that people
| here would not fall for this crap
| motohagiography wrote:
| Already imagining a black mirror Nosedive app that recognizes
| products in your location and environment and presents offers to
| buy or sell the stock of the companies that produce them based on
| your experiences of the produts in the moment.
|
| The irony is of course is the adage, "Hate the service? Buy the
| stock" because it's so valuable people use it in spite of it
| sucking. Nobody ever thinks, 'this is terrible, how do I get
| long?' or, 'this is so awesome it can't possibly last, how to get
| short?', but that's how some traders make a living.
| anonu wrote:
| The incident occurred at 526pm local time on the West Coast, so
| markets were closed. You wouldn't be able to trade.
|
| I'm a bit surprised that question is being asked. Fundamental
| investing is all about understanding things about a company that
| nobody else knows. This is an age old approach to investing. If
| you happen to stumble on that information, it doesn't make it
| insider trading.
|
| Where is crosses the line is if you're an insider and effectively
| breach your duty to the company or as a fiduciary. You're
| effectively stealing from the company. A passenger on an airline
| cannot steal information.
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