From: Black Unicorn <unicorn@schloss.li>
Date: Tue, 4 Jun 1996 09:05:22 +0800
To: Jeff Barber <jeffb@sware.com>
Subject: Re: Saw this on CNN: Anonymous Stock tips over IRC as bad???
In-Reply-To: <199606031507.LAA15317@jafar.sware.com>
Message-ID: <Pine.SUN.3.91.960603150424.8479C-100000@polaris>
MIME-Version: 1.0
Content-Type: text/plain


On Mon, 3 Jun 1996, Jeff Barber wrote:

> Perry E. Metzger writes:
> 
> > Timothy C. May writes:
> 
> > > And, how can someone who acts on overheard information--as in the elevator
> > > example Sandy cited--be charged with any crime? Unless they are "insiders,"
> > > covered by SEC rules about trading, they are free to act on essentially
> > > anything they hear.
> > 
> > No, I'm afraid they aren't. Under the rules, if you have nonpublic
> > information, even if you are not a corporate officer, you are an
> > insider for purposes of "insider trading" and your trades are illegal.
> 
> > > (To elaborate on this: I was never classified as an "insider" during my
> > > time at Intel, and I certainly bought and sold the stock based on what
> > > products and news I knew was coming out or what rumors I'd heard. Only a
> > > select group of executives and staff in the specific departments generating
> > > earnings announcements, auditing, etc., were covered.
> > 
> > Only they were covered by the rules that require registration of all
> > trades, you mean. You are completely confusing two uses of the word
> > "insider".
> 
> IANAL, but I think you must be wrong about this, Perry.  If this were
> the case then, as an employee of company XYZ, I would never be permitted
> to buy XYZ stock (which is clearly not the case) since I *always* have
> information that others outside the company do not (about staff changes,
> product plans and such).  I suspect the deciding factor must have to do
> with the ability to execute actions which have substantial direct effects
> on the stock price (i.e. buying a company, declaring dividends, having a
> massive downsizing, etc.).

Incorrect.
The deciding factor is the court's determiniation of whether the 
information was "material non-public information."  As the question of 
materiality is vague, subjective and subject to whim, even a low level 
employee is risking time and fines.  Often materiality has exactly zero 
to do with what effect it may have on stock price.

There is a simple solution to avoiding liability.  Don't trade in your 
own company's stock.

You make the case that it is somehow shocking to think that an employee 
wouldn't be able to buy stock in their employer.  Such restrictions have 
existed for decades.  Why are you so stunned?

> 
> 
> -- Jeff

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