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The U.S. Supreme Court will hear a case about insider trading for the first time in two decades:
U.S. Supreme Court justices suggested they will make it easier to prosecute Wall Street figures for insider trading as the court heard arguments on the subject for the first time in two decades. Taking up the conviction of onetime Chicago grocery wholesaler Bassam Yacoub Salman, the justices weighed Wednesday whether someone can be sent to prison for making trades when the insider who provided the tip wasn't looking to make any money. A majority of the eight justices indicated a willingness to uphold the conviction.
A victory for the government would be a boost for prosecutors and the Securities and Exchange Commission, restoring some of the leverage they lost in 2014 when a federal appeals court in Manhattan imposed new requirements on government lawyers. The New York court's ruling undercut U.S. Attorney Preet Bharara's eight-year crackdown on Wall Street cheating and led to more than a dozen insider-trading convictions being thrown out. Justice Stephen Breyer said that ruling had changed decades-old rules for insider trading by requiring prosecutors to show that the insider received a concrete benefit. Salman's lawyer is urging the court to adopt that standard nationwide.
Also at Reuters and The New York Times .
(Score: 3, Insightful) by Phoenix666 on Thursday October 06 2016, @11:36AM
The name of the guy being prosecuted is not Chad Harrington, III, an investment banker from Wall Street, but Bassam Yacoub Salman, a grocery wholesaler from Chicago. Yes, that will certainly crack down on Wall Street and placate the angry mobs who are fixing to behead them for their crimes.
Washington DC delenda est.
(Score: 4, Interesting) by bradley13 on Thursday October 06 2016, @12:18PM
The grocer-guy is the one appealing, because he was not a corporate insider. His brother-in-law (who was the insider) gave him tips. The law apparently defines the illegal behavior as "the insider’s abuse of confidential corporate information for personal profit." So if the grocer-guy wasn't the insider, then perhaps he should not have been prosecuted.
The question is: why isn't the brother-in-law in jail? He gave away corporate secrets to a family member, knowing that these would be used to profit. While the insider may not have profited directly, it's "all in the family", i.e., he almost certainly profited indirectly.
tl;dr: They prosecuted the wrong person.
Everyone is somebody else's weirdo.
(Score: 1) by Francis on Thursday October 06 2016, @01:50PM
They should have both been prosecuted, my guess is that since the brother-in-law didn't execute any trades that they couldn't make a case against him. Whereas the guy they prosecuted was foolish enough to buy shares based upon insider knowledge.
AFAIK, it's a matter of whether or not you've got access to confidential materials not available to the public in order to be prosecuted for this. I don't personally work for MS, but if a friend of mine tipped me off about some significant development that hadn't been announced and I bought shares based upon that, I could expect to be prosecuted if anybody noticed the irregularity.
(Score: 2) by Joe Desertrat on Thursday October 06 2016, @10:20PM
AFAIK, it's a matter of whether or not you've got access to confidential materials not available to the public in order to be prosecuted for this. I don't personally work for MS, but if a friend of mine tipped me off about some significant development that hadn't been announced and I bought shares based upon that, I could expect to be prosecuted if anybody noticed the irregularity.
I'm not so sure this is morally or ethically wrong. How would it be different if a MS employee increased his purchase on the employee stock plan based on knowledge he had of company workings or if he told a friend who then bought some extra shares? There is a grey area, I think the standard for insider trading as criminal should involve whether stock prices were manipulated to increase profit based on the insider knowledge. Had the MS employee leaked false negative information to drive stock prices down before he and his friend purchased their shares, I would consider that criminal insider trading. Just getting a "hot tip", no.
I think the bigger problem is that there is so much volatility in the market, with stock prices being manipulated for those purchasing for the short term rather than for long term investment. That leads to the "this quarter" mentality that is the bane of so many companies these days.
(Score: 2) by bob_super on Thursday October 06 2016, @04:34PM
If I understand the law correctly from my training:
- The leaker should get fired for providing company secrets to an outsider
- The company is exposed to a lawsuit from shareholders losing value because of the scandal. If proper insider training was provided, the company can deflect the lawsuit towards the leaker, which would result in him getting hit by the fines, but probably not jail (easy to argue a family discussion with no personal gain motive, as long as he's not recorded telling him to absolutely buy).
- The insider trader should get fined about 3x the gains, and an optional jail time.
But if the law was clear-cut, we wouldn't be talking about the Supremes having to address the case.
(Score: 2) by frojack on Thursday October 06 2016, @06:39PM
why isn't the brother-in-law in jail? He gave away corporate secrets to a family member,
So not only should government police step in an protect IP interests of the Motion Picture Association, but now you want them to get involved on any corporate gossip or loose lips? My god, how big of a police state are you trying to create here?
Plastics! https://www.youtube.com/watch?v=PSxihhBzCjk [youtube.com]
No, you are mistaken. I've always had this sig.
(Score: 1) by Francis on Thursday October 06 2016, @08:34PM
I take it you don't know what insider trading or care about the consequences.
It's already hard enough for small investors and investors that aren't in the loop to make a profit trading in stocks and bonds. Allowing rumors to be the basis for trading when the rumors aren't available to the public means that certain traders can reap most of the rewards that come from the stock market with everybody else shouldering much more risk for much less reward.
It's bad enough that things like High Frequency Trading and options are allowed, allowing them to keep each other in the loop about events that are likely to impact stock price would break the system in an irreparable way.
(Score: 0) by Anonymous Coward on Thursday October 06 2016, @11:40PM
So basically, WAH WAH!! I'm not one of the cool kids, its NOT FAIR!