[dragons]

> Stay the hell away unless you have some privileged information on the the company (and even then, stay away 90% of the time).

You may not want to trade based on "privileged information" either... if it's insider information you can get in trouble. http://en.wikipedia.org/wiki/Insider_trading

[gutnor]

It is very tough to prove insider_trading. As long as you don't put anything in writing, you can get away with insider trading even if you are the wife of an executive and got the tip during pillow talk.

[gutnor]

Well, since this get downvoted, and I cannot edit my post - here is more meat.

The case I'm thinking about is the case of http://en.wikipedia.org/wiki/Karel_De_Gucht

Not saying that it is not illegal, but insider trading and even the definition itself is a huge gray area ( like when you talk to a friend at the pub about the new cool project you are working on, you are giving privileged information )

So although insider trading legislation are good, in practice they have less teeth than they should.

When investing, it is a safer approach to assume others have privilege information. Even in the case you have insider information, that is also better to assume others have better one, hence the GP advice to stay away from the peny stock even when you know someone.

Here is the interesting bit about De Gucht. ( He could be saying the truth or not, that's not my point, but under strict insider trading regulation this coincidence would not have passed )

"On 3 October 2008, his wife, Mireille Schreurs, and brother-in-law sold their shares in Fortis Bank after a governmental crisis meeting to deal with the precarious financial situation of the bank, hours before the public announcement that the Dutch arm of the bank would be nationalised and the partly nationalised Belgian and Luxembourg branches sold to BNP Paribas.[7] An anonymous complaint was received by the Belgian Banking, Finance and Insurance Commission alleging De Gucht's wife sold €500,000 worth of Fortis shares.[8] De Gucht acknowledges that his wife and brother-in-law sold their mother's shares in Fortis Bank on the date in question for a smaller amount than alleged, but they deny that any insider trading was involved. He also points out that he personally lost €85,000 as a result of the nationalisation and sale, and that his son, Jean-Jacques De Gucht, and mother kept their shares in the failing bank."

[nate_meurer]

This is dangerously false. I sincerely hope nobody takes this comment seriously.

In the US, insider trading is typically charged as a civil offense, where the SEC doesn't need to prove anything. In civil cases the SEC is often only held to "preponderance of evidence" standard -- even lower than the "clear and convincing evidence" standard used in most civil fraud cases.

Only if the charges are criminal does the SEC have to prove their case.