From: Duncan Frissell <frissell@panix.com>
Date: Tue, 4 Jun 1996 09:36:38 +0800
To: tcmay@got.net (Timothy C. May)
Subject: Re: Saw this on CNN: Anonymous Stock tips over IRC as bad???
Message-ID: <2.2.32.19960603200355.0075cc58@popserver.panix.com>
MIME-Version: 1.0
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At 11:23 AM 6/3/96 -0400, Perry E. Metzger wrote:

>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.

Though if I trade based on my non public knowledge that the Gray Aliens will strike at Midnight on 31 December 1999, I am probably safe.  Doesn't the non-public knowledge have to have been generated or concern internal company information (or the intentions of a publisher or buyer concerning the company).  If info that is too far removed is included then any stock analysis system would be illegal.

Note BTW that the Feds lost almost all of the '80s insider trading cases that actually went to trial.  They only won 2 or 3 that went through the full trial and appeals process.  That is a very poor record since prosecutors usually have an 80-90% success rate in criminal trials. 

>Securities laws are extremely complex, extraordinarily broad, and
>subject to extremely flexible interpretation. I would suggest not
>attempting to skate a fine line near them -- the ice is very thin.

And like most federal criminal procedures based more on hype than reality.  One should emulate the head of Princeton Securities who showed up for settlement negotiations with the Feds wearing a "Shit Happens" baseball cap.  All charges dismissed on appeal.  

I do think though that many actual "inside traders" are pretty dumb since it is not hard to trade securities anonymously.

DCF