Ethics of insider trading

[Scorpion Man]

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A few of my friends are going off to do i-banking this summer and we got into the discussion of insider trading. Seems like it would be pretty easy to do on a small scale, though we wont be doing it anyways. But what are the moral reasons for not doing it? Who is getting hurt? The best I could come up with was the investors who sell to you not knowing as much as you do because of your ill-got information. But isnt that the same thing as doing more research than someone else? There have to be some issues here im overlooking...

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The most important unethical reason for insider trading is that, broadly, insider trading undermines faith in our markets. The robustness of US markets is a major competitiveness for the country. Insider trading detracts from confidence in these markets.

[APXG]

This whole discussion is similar to the ZJ thing. Many of us believe the ethical / unethical nature of it was blown out of proportion, but in the end, the key is keeping the fish feeling secure, both for us and the pokersites. ANY sort of gray popular media attention-attracting activity should be kept illegal, even if it isn't unethical. There are other, more discreet edges to capitalize on that are not so apparent, just like in poker.

[GoodCallYouWin]

Is insider trading unethical? Well ethics and morality are entirely subjective, so that depends on the person. I don't consider it wrong, but I don't consider killing wrong either (by that I mean, I believe morality to be a fraud).

[ilikeaces86_]

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Is insider trading unethical? Well ethics and morality are entirely subjective, so that depends on the person. I don't consider it wrong, but I don't consider killing wrong either (by that I mean, I believe morality to be a fraud).

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Just because you don't consider something such as killing wrong doesn't have any effect on whether or not it IS wrong. A little thought experiment for you. I am holding a certain number of beans in my hand. There is a definitive answer to how many are in my hand but you can't see how many are in there. I ask you to guess how many beans are in my hand and you say 5. I open my hand and count 10. The fact that believed that there were 5 doesn't change the fact that there were 10. You can't say I don't believe something is wrong and suddenly it isn't wrong. What you believe is irrelevant to what is in reality right and wrong.

[MuckerFish]

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Hmmm, where to begin. Perhaps I should start a "ask me all you want to know about insider trading" thread? I have finally found a use for my vast knowledge on the topic.

I got busted with some friends a couple of years back. I got off VERY light, but my friend is banned from the industry for life and did a year in federal prison. Do yourself a favour and don't do it. If you are smart enough to get a job in i-banking, you will make enough money to live comfortably. I was never charged with a crime, but there will always be a civil court case on the SEC website with my name on it. I'm sure that someday a future employer will find it with a Google search.

To summarize: Insider trading bad.

Pufchamp

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How hasn't anyone asked for a TR yet?

TR please.

[NajdorfDefense]

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I thought I read MDs have to sign off on personal trades if you work for an i-bank. Can anyone verify that?

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Yes, when I was at GS, the Partner in charge had to do so, other places your MD and of course Compliance.

[Puf2006champ]

Does TR mean trip report? Even if nobody reads it, I guess I should expand a little as my small attempt to save somebody from SEC hell. This is the short version.

It was the roaring time of the Internet bubble of 2000. Everybody was getting rich and my friend was a newgrad hire at a large bank of Wall Street. He suggested that it would be easy to pass on some info that he would obtain from the company network (logged on as somebody else). We would split the money 50/50 after taxes.

Things went a little too well and I made 15 times my money in one day with a rather well timed options buy. About a week later, my friend calls me and tells me to expect a call from the SEC. Sure enough, the SEC calls me the next week and asks me "if there is something I would like to discuss." Real life is not like Law and Order where they show you all the evidence and try to trick you into some deal. I could either discuss things with them and (maybe) they would not add my name to the indictment or I could not discuss things with them and they would find some room to add my name. I was not indicted and the SEC was kind enough to just make me give the money back. The original estimate was $25,000 in fines and $25,000 for legal fees (assuming it stayed civil and not criminal), but I was lucky to keep it under $10,000 total. For those of you who say you will never rat out your friends, you are dead wrong. It is just a matter of them dealing with it as quickly and as sanitary as possible. The idiots (me and another friend) give up bigger idiot (friend at bank) in the hopes that he can give up his boss, etc. My friend worked for some big players and I hoped that he had something on them that we could bargain with. I guess he didn't.

If you think you are too smart to get caught, maybe you are right. Two of the people involved in this are some of the smartest people you will ever meet. Ego and greed can be a bitch. My friend did a year in federal pound me up the ass prison and he made every major newspaper in North America. He was also listed in the New York Post's daily list of winners and losers with Bill Gates and Michael Jackson. Personally, I made the list of articles at the bottom of the Yahoo ticker for the bank. My uncle found out because he is a shareholder and read the article just out of curiosity.

I spent two years dealing with this by the time it all wrapped up. If you are in the banking business, you will be charged with a felony and you will be banned for life. I suggest living life in the slow lane when it comes to your profession and criminal record. Go get yourself a lap dance at Scores for fun with your fat bonus and be happy with that.

[Big Steve]

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A few of my friends are going off to do i-banking this summer and we got into the discussion of insider trading. Seems like it would be pretty easy to do on a small scale, though we wont be doing it anyways. But what are the moral reasons for not doing it? Who is getting hurt? The best I could come up with was the investors who sell to you not knowing as much as you do because of your ill-got information. But isnt that the same thing as doing more research than someone else? There have to be some issues here im overlooking...

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Insider Trading is Insider Trading

It is no different that going to Wal-mart and seeing an associate that you know works there and she says "Don't buy that today, it will be on sale starting Sunday."

Big Steve [img]/images/graemlins/cool.gif[/img]

[El Diablo]

All,

Thoughts on this scenario: I'm having drinks at the end of a quarter with a friend who happens to be in charge of sales at a publicly traded company. He is pounding down martinis like crazy. I ask him "rough day?" and he responds "f, rough quarter, how does not a single big deal come through?"

Earnings report in a few days.

How do you feel about these things:
a) I sell my holdings
b) I call a few friends and tell them I think XYZ is gonna miss all their numbers and tank
c) I short the stock

[pig4bill]

"In charge" of sales? Meaning like the VP of Sales? You're treading on dangerous ground. That's not too different than Sam Wacksal calling Martha Stewart, even though she was not accused of insider trading (although listening to the idiot jury afterwards, that's what they convicted her of). If it were just a staff salesman, that's not considered "information".