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
short answer: hindsight is a b***ch, and the stock market is full of people who can afford *very* good lawyers.
while theirs little at the time that could be done, the fact that you traded on insider information for person profit would very rapidly become clear to anyone intrested in finding out, because your stock trades are generally publicly discoverable, in large part to ensure fair play like this.
ergo, the fact that you cashed out JUST before major news that caused price changes came out would be obvious once the change happened, and you would get investigated by a lot of people who just lost money and are wondering what you knew, when.
Since the modern financial system is the product of literally *centuries* of people trying to outplay the game, Theirs very few tricks that someone hasn’t already thought of & tried, and rules written to punish the next attempt.
so, the answer is the threat of legal punishment is part of what keeps them honest. its not perfect, but anything that “even a layperson can think of” has rules in place to stop it, which are backed by the collective legal and financial might of *everyone else in the market*, in a sort of mexican standoff sorta way.
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