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We _do_ know to sell sharesWe _do_ know to sell sharesPosted Jun 15, 2004 23:22 UTC (Tue) by JoeBuck (subscriber, #2330)In reply to: We _do_ know to sell shares by lakeland Parent article: Red Hat's Red Flags (Motley Fool) You have just advocated a crime. If you know that a public company is going to make an announcement, the general public doesn't, and you trade on that knowledge, you could be prosecuted for insider trading. I know an prosecutor for the SEC, and it's his job to bust people for this kind of thing. Most of the time the guilty party avoids going to jail, by taking the usual settlement offer of "disgorging" (yes, that's the legal jargon) all profits and paying additional fines. Apparently Martha Stewart was offered such a deal and chose to fight instead. Bad mistake.
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We _do_ know to sell shares Posted Jun 16, 2004 1:43 UTC (Wed) by lakeland (subscriber, #1157) [Link] > You have just advocated a crimeNo, I didn't. From my post: "(perhaps you read it the second it is released)". There are an awful lot of things which you can legally know but the average investor does not know. For instance, you know SCO has less chance of of winning the court case against AutoZone than winning the lottery. However, the average investor does not know that -- can you buy and sell shares based on your extra information? You bet. If you were also a lawyer then you'd be able to guess even more accurately. Insider trading is designed to ONLY prevent you using priveleged information. If you have unpriveleged infromation which lets you get one up on the other investors (such as bullshit detector that works on IT press releases) then you are welcome to use it. If you have unpriveleged information that you obtained through legal means a little before the other investors then you're welcome to profit by using it first. In fact, you're an idiot if you don't. Say you read that SEC filing by SCO, and you know a little bit more about the Indian legal system which makes you expect SCO will win their $300k back, you can perfectly legally use that information to guess SCO shares are going to rise when the information comes out. Similarly, if you have a PhD which tells you a product being hyped is physically impossible (vapourware) then you can perfectly legally set up a futures trade that could make you a killing. My particular example said that you got the information as soon as it was made public -- in other words it was public information when you got it and that makes it fair game. Of course, if you had a mate at SCO who tipped you off that a PR was about to come out then that's totally different. I believe you're even allowed to do things like subscribe to AP so you get stores 30 mins before they appear on the WSJ, but I'm not 100% on that one. I don't understand why people find insider trading so confusing. It is pretty simple -- If you are party to priveleged information (say you help audit the books) then you've got to be damn careful with any trade you do. However, if you are not party to priveleged information then you can do whatever you like. If you happen to be able to read more into the publically available information than other people then you're welcome to profit from that. The goal of banning insider trading is to put all investors on a level playing field, imagine if a developer at a software company was allowed to sell all their shares the day before announcing their flagship product was vapourware. Not quite sure how many times I repeated myself above, but hopefully you'll see my point.
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