Insider trading certainly seems illegal. People continue to be indicted for it. Congressmen continue to plead guilty to it. Other people remain in jail convicted of it, or, having left jail, just convicted of it. Still others continue to be sued by the SEC for it. So, yea, in spite of the hopes briefly kindled by a 2014 ruling severely limiting its scope and by the soon-to-be-dead Antonin Scalia’s dreams of rendering it not, insider-trading is definitely still illegal.

But, like, how illegal? Or, more to the point, what aspects of insider-trading are illegal? What, essentially, is insider-trading? This definitional issue is a good deal less clear than the, “is any kind of insider-trading illegal” issue. To paraphrase another court ruling, judges just seem to know it when they see it. This has predictably led to some rather disparate interpretations, uneven enforcement, one particular person not really sure if he insider-traded in spite of having pleaded guilty to it, and enough hand-wringing to lead some people to throw their hands in the air and say, “Fuck it! Just let people do whatever they want.”

This is not the view of Rep. Jim Hines (D-Hedge Funds) and 409 of his colleagues on Capitol Hill, who very much believe that insider-trading is and should be illegal, and think that they know what it means, because as congressmen who have not resigned for insider-trading, they get to decide what it means. Assuming Mitch and Don decide to get on board.

Since the 1960s, insider trading has been delineated primarily by court rulings built around a broader statute against securities fraud…. The House bill aims to establish a legal foundation that is less susceptible to change.

It doesn’t require prosecutors to prove that a defendant knew how a piece of inside information was obtained or whether there was a personal benefit paid to anyone in the chain of communication. Instead, the recipient or provider of an improper tip would be liable for insider trading as long as they were “aware, consciously avoided being aware, or recklessly disregarded that such information was wrongfully obtained or communicated.”

The bill also prohibits people with access to material, nonpublic information from tipping off others if it is “reasonably foreseeable” that the recipient will either trade on the information or forward it to others who will.

House Passes Bill Establishing a Clear Definition of Insider Trading [WSJ]



Office Space: Insider Trading

The downtrodden of a Silicon Valley IT department get their revenge. Briefly.

After The STOCK Act It Will Still Be Legal To Trade On Congressional Inside Information*

Here's a sort of touching monologue from David Einhorn's call with Punch: If you’ve done the analysis, and come to the conclusion that on it’s own, the company is not going to make it, it makes all of the sense in the world to raise equity at whatever the price is, so that you can know that the company, you know, is – is going to make it. Now, what that brings to my mind though is, you know, obviously we haven’t done your analysis, we haven’t done -- signed an NDA; I don’t know that we’re going to sign an NDA, because we prefer to just remain investors, but from my perspective, and I’ll be just straight up with you, is that gives a lot of signalling value. And the signalling value that comes from figuring out the company has figured out that it’s not going to make it on it’s own is that we’ve just grossly misassessed the -- you know what’s going on here. And -- and that, that will cause us to have to just reconsider what we’re doing, which is not the end of the world to you. You will continue on even if we don’t continue on with you. You could sort of see why the FSA read that to mean that he was insider trading. Like ... (1) You have told me something with signalling value. Sorry - "a lot of signalling value." (2) I will now act on that signal. (3) Don't be mad. "Signalling value" sure sounds like it means "material nonpublic information," doesn't it? Now as we've discussed before, trading on that information would not be enough to make Einhorn guilty of insider trading in the US, though maybe it wouldn't be exactly a great idea here either. Why? Because in our weird but sort of sensible insider trading laws, it's just not illegal to trade on material nonpublic information. It's only illegal to trade based on material nonpublic information that was obtained in violation of some sort of duty of confidence. Since Einhorn didn't sign an NDA, he had no duty of confidence. And since the Punch CEO and bankers weren't tipping him for nefarious purposes, but were instead sounding him out on the company's behalf as a shareholder and potential investor in a new capital raise, they weren't breaching their duty of confidence. You could quibble with the details of that but it's basically the law here. In England not so much. That also seems to be the law for our friends in Congress, who recently passed a law making it illegal for them to insider trade, which is worrying some people who make their living from trading on Congressional inside information:

long island iced tea

Former Long Island Iced Tea Allegedly Doing Some Long Island Insider Trading

Certainly more than its doing any iced tea, or blockchain, for that matter. Allegedly.


Adorable European Politicians Accuse Wilbur Ross Of Insider Trading, Think It Actually Matters

There’s nothing quite like the naively impotent rage of the European Parliament.