[philwelch]

This is a good opportunity to point out that insider trading is a victimless crime. If you sell stock with insider knowledge, you sell it to someone who would have happily bought it at the same price or possibly a higher price from someone else anyway. The same is true if you buy stock with insider knowledge. The only net effect of insider trading is to make the market more efficient by pricing in otherwise inaccessible information.

[filoleg]

> This is a good opportunity to point out that insider trading is a victimless crime.

It is a "victimless crime" in the same sense as selling someone a house is, fully knowing that a pipe in the basement is going to burst 6-12 months later and not disclosing it to the buyer (which would've made the house value go down, if the buyer knew it).

That "someone who would have happily bought it at the same price or possibly a higher price" is someone who wouldn't have done it, knowing what the insider knows, they would've waited. And the same is true for "insider knowledge that is related to something good about the company that's going to happen soon and pump the share price", you wouldn't sell your shares for as cheap as they are if you knew what the insider knows.

[philwelch]

> That "someone who would have happily bought it at the same price or possibly a higher price" is someone who wouldn't have done it, knowing what the insider knows, they would've waited.

If you are the prevented from selling a particular house without disclosing some fault in the house, the buyer is prevented from buying that particular house. On the other hand, if I am aware of some fault in Apple Inc. and am prohibited or prevented from selling my AAPL shares, the buyers whom I would have sold to will not only still buy AAPL shares from someone else, they will likely pay a higher price for them!

Again, if the law required corporations to publicly reveal, as soon as possible, any and all insider information that may potentially influence the company’s market valuation, that would be one thing. Instead, not only are they not required to do that, but the information is not even allowed to leak out onto the markets in the form of insider sales which would depress the stock price and tip off investors that, even if they don’t know exactly what it is, that something is wrong with the company.

[gpderetta]

The ridiculous thing is that selling an house without disclosing known effects is perfectly legal in England (caveat emptor) as long as you didn't lie if specifically asked. I.e. you do not have to volunteer the information.

[kevinmchugh]

If I work for Apple and I'm on the special secret new Apple Glasses project, I reasonably know that when the product is announced the stock is going to go up. That information belongs to Apple, not me. Apple could sell more shares to capitalize on the announcement. By buying shares before the announcement, I'm capturing some of the gain that should be Apple's.

[filoleg]

That's why companies like Apple have very strongly enforced rules related to this for their employees, like blackout windows on trading AAPL shares and not allowing them trading AAPL shares at all. And there are even more restrictions for those working on certain teams and in certain areas (e.g., finance/accounting). Buying/selling right before the big announcement or earnings reports is straight up not allowed.

I don't know the actual dates for Apple (as I only have friends working there, I haven't worked there myself, and I didn't quite care to ask for the exact length of trading blackout windows). But I know for a fact myself that at Google you get a trading blackout window that starts around 3-4 weeks before the quarterly earnings announcements and ends around a week or so after. And you are not allowed to trade GOOG options at all while an emlpoyee, not even outside of those trading blackout windows. There are additional blackout windows as well, but that's beside the point, and I don't remember them off the top of my head. And that's just for a run-off-the-mill software engineer working on an internal infra product that isn't some super-top-secret thing.

[philwelch]

An employer should be (and AFAIK is) free to contractually obligate you not to front-run their own trading strategies. There’s no need for a federal criminal statute that, as far as I can tell, isn’t even primarily motivated by this use case.

[HPsquared]

If the company itself was to buy its own stock based on non-public information, wouldn't that also be insider trading? The corporate entity itself is, like, the ultimate insider.

[cozzyd]

Or if you are in a position where you can sabotage it somehow (introduce a bug in an update that calls the HCF instruction)...

[MichaelNolan]

That might be true in some abstract sense, but it sets up some really perverse incentives. No one, especially investors, wants to legalize insider trading.