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Old 11-27-2007, 12:44 PM
Phone Booth Phone Booth is offline
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Join Date: Aug 2006
Posts: 241
Default Re: Is This Insider Trading?

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What about cases where you buy ahead of forming a relationship? And how can anyone actually prove that you traded on the insider information, if that information happens to be your own decision?

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It would probably depend on how far in advance you purchase in advance of forming the relationship and how significant the relationship is, but I don't know of any cases that test this specific issue.
The second issue has a clear answer and is known as the "use" or "possession" question. Courts had split on whether the government needed to show that you actually used the inside information in making the trade or instead just show that you had inside information when you traded. The SEC solved the problem by adopting the possession rule, so if you have inside info and you trade you are in violation of 10b-5. It's nice to be the government.

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Sorry I was being unclear but what I meant was that how do they show that you were in possession of the information at the time of the trade, if the information is something that was formed in your head. As in, one can always say he made the decision after the trade, thus the information did not exist at the time of the trade. I guess circumstantial evidence is all they need, but it seems all very murky to me.
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