how is insider trading prevented on events like earnings of mega companies such as Nvidia, Apple, Microsoft, Google, etc…? Even layman can think of ways how key people in those companies could earn billions and billions via some sort of nominee figures. So, are they just doing that?
In: 9
The other posts here are correct.
In addition, enforcement happens even when there is merely a risk of insider trading.
For example, if a company has a major event (like something disclosed on a Form 8-K) that meaningfully impacts stock price, FINRA will investigate insider transactions around the time of the event, and will contact the company to learn who might have known about the event before it was announced. They do this any time there is a major event, even if there isn’t any suspicious trading activity.
In addition to the blackout or trading windows, some people (generally the Board and the Section 16 Officers) literally cannot trade without permission from the company’s legal dept., and the lawyers have every reason not to help trade on inside info.
Finally, if you are convicted of insider trading, you lose certain legal privileges. You will never again have a job as an officer at a publicly traded company, and if you are an officer at a private company that company cannot take outside investment money as easily as otherwise. It is also generally required to be disclosed as part of an investment (think venture capital and private equity), and many investors simply don’t want to be associated with it, even if they subjectively believe that you are honest (other than your insider trading). In addition to the reputational impact, those roles tend to be extremely lucrative, making the quick-and-risky insider trading route a lot less attractive.
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