I get that the SEC monitors for spikes in trading and they take a look at people who sell a large amount of stock before a major event and stuff like that. Is that really enough to prove them guilty, I thought it needed to be undoubtedly proven to be convicted for it, like they have a phone recording of you receiving the information, even though you sold a load of stocks at exactly the right moment that doesn’t necessarily prove that you had insider information. You could have predicted it and moved accordingly by analyzing the companies and coming to your conclusion.
In: Economics
It’s like any other crime, people talk and the police listen. For example Marth Stewart when to jail for insider trading, because her stock broker’s assistant when to the investigators and told them what happened.
> even though you sold a load of stocks at exactly the right moment that doesn’t necessarily prove that you had insider information.
Of course it doesn’t. But what it does is trigger an investigation. They figure out who you know and if any of them might have had insider information, and if so, they investigate, same as any other crime.
Sometimes they don’t find anything because you didn’t do anything wrong. Sometimes you did do something wrong but they miss it. And sometimes you did something wrong and they find it and you go to jail.
And also remember that from a purely technical perspective, everything a trader does in a company is monitored and logged.
All your emails, IMs, SMS and so on. If it is on a corporate device, assume it’s been recorded and saved.
That’s assuming it’s in a reputable company of course.
yeah insider trading is tricky but it’s like a puzzle. they look for patterns and coincidences that just don’t add up. if you sell your stocks right before bad news you’ll raise some eyebrows. they don’t need a recording but lots of circumstantial evidence can lead to a conviction. kinda like reading the room right before a big surprise party you know it’s suspicious if you bail out.
With great difficulty. First off you have to find the spikes indeed that happen shortly before a significant event.
It doesn’t end there of course. If someone whom certainly has access to privileged information does this, well that is an easy one. You’re on the board of directors, of course you had the info.
Beyond that it is extremely difficult to get convictions for insider trading to the point that we even had a famous case here during the banking crisis where the wife of the then Secretary of Something, sold off a buttload of shares in a big bank, days before the bank where her husband was on the Board of Directors, announced their plans which essentially meant breaking up the bank, which cratered the value.
Their defense: “I never talk to my wife about work.”
It worked.
Sorry to hijack your topic OP but since it’s still kinda active
I was told that insider trading is not a victimless crime. Can someone explain why that is?
yeah it’s wild how they can connect the dots just from trading patterns like that. it is like a big puzzle and sometimes it just clicks. they look at all evidence like phone records and even emails. so even if you think you’re smart by predicting stuff it could still look shady. it’s tough being a trader tho but gotta play by the rules
FINRA and SEC will circulate lists of suspicious trades to companies going through M&A or other events that generate large swings in stock price. Suspicious could include taking a large position in a stock you’ve never owned before right before a major change in stock price.
Here’s a perfect example:
https://www.reuters.com/legal/government/prosecutors-say-fbi-trainee-stole-tips-lawyer-girlfriend-trade-merck-deal-2022-07-25/
In this case is girlfriend/ex girlfriend likely reported him once his name was circulated amongst her firm.
Likely then the feds begin investigating and squeezing.
If you were to overhear at a urinal at a bar two M&A lawbros talking about a deal you’d likely get away with it and thus had no connection and also didn’t document your crimes in text message or on wallstreetbets you’d likely be able to get away with it.
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