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  #31  
Old 11-27-2007, 01:16 AM
Jason Strasser (strassa2) Jason Strasser (strassa2) is offline
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Default Re: Is This Insider Trading?

[ QUOTE ]
1. Favorable clinical trials at my company haven't been announced yet. So I can't buy the stock. But I short a competitor's stock.

2. I'm at a pay phone and I overhear the president of IBM lamenting the surprisingly bad earnings for this quarter as he speaks to the chairman on the neigboring phone. I short IBM.

3. I hear two apparent terrorists in the neigboring booth at a restaurant talk about throwing a bomb into the Wynn casino every day for a week. I notify the FBI but I also short the stock.

[/ QUOTE ]


you are using material nonpublic information to make bets on the market. are you dumb, this is all so cut and dry insider trading.... you understand that the idea behind insider trading is that you abuse the system and take advantage of NONPUBLIC information.
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  #32  
Old 11-27-2007, 01:36 AM
stinkypete stinkypete is offline
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Default Re: Is This Insider Trading?

[ QUOTE ]

you are using material nonpublic information to make bets on the market. are you dumb, this is all so cut and dry insider trading.... you understand that the idea behind insider trading is that you abuse the system and take advantage of NONPUBLIC information.

[/ QUOTE ]

except 2 and 3 are not considered "material". 3 isn't even close.
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  #33  
Old 11-27-2007, 01:38 AM
Shoe Shoe is offline
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Default Re: Is This Insider Trading?

Others have nailed the points in question pretty good in this thread. I think the real question that remains is this, what did you hear at the poker table? Specifics are required in this situtation to determine if it is insider trading or not (Usually, if you just overhear a conversation it is not insider trading). Unless one of your examples are an exact match to your situation, then it's a definite grey area. PM if needed.

Best Regards,

Shoe
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  #34  
Old 11-27-2007, 01:47 AM
Jason Strasser (strassa2) Jason Strasser (strassa2) is offline
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Default Re: Is This Insider Trading?

[ QUOTE ]
[ QUOTE ]

you are using material nonpublic information to make bets on the market. are you dumb, this is all so cut and dry insider trading.... you understand that the idea behind insider trading is that you abuse the system and take advantage of NONPUBLIC information.

[/ QUOTE ]

except 2 and 3 are not considered "material". 3 isn't even close.

[/ QUOTE ]


you are crazy to think that you are allowed to overhear information about earnings from someone who knows inside information and act on it.... im not a legal guy but i know that these rules are ultimately driven by intent and 2 is a clear situation of intent to cheat and I am pretty sure hearing something verbal constitutes material nonpublic information....

situation 3 is a little weird but imo this is clearly also cheating.
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  #35  
Old 11-27-2007, 01:51 AM
stinkypete stinkypete is offline
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Join Date: Jul 2004
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Default Re: Is This Insider Trading?

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]

you are using material nonpublic information to make bets on the market. are you dumb, this is all so cut and dry insider trading.... you understand that the idea behind insider trading is that you abuse the system and take advantage of NONPUBLIC information.

[/ QUOTE ]

except 2 and 3 are not considered "material". 3 isn't even close.

[/ QUOTE ]


you are crazy to think that you are allowed to overhear information about earnings from someone who knows inside information and act on it.... im not a legal guy but i know that these rules are ultimately driven by intent and 2 is a clear situation of intent to cheat and I am pretty sure hearing something verbal constitutes material nonpublic information....

situation 3 is a little weird but imo this is clearly also cheating.

[/ QUOTE ]

having reread 2, it's a little unclear, but if all you know is that he's discussing earnings and he looks/acts upset (which is how i originally interpreted), that's perfectly fine. if you actually overhear something material, thats another story.
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  #36  
Old 11-27-2007, 04:11 AM
Rotating Rabbit Rotating Rabbit is offline
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Default Re: Is This Insider Trading?

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]


Im doing CFA level 3 and i believe the CFA answers would be yes, yes, yes as well.

For anyone whose interested, the cfa definition is to the best of my memory "if you ACT with the intention of profit with the use of MATERIAL, NON PUBLIC information" its bad.

In all these cases, the information is surely both material and non public.

[/ QUOTE ]

If the CFA program says that, then I believe it isn't trying to teach you what the law is, it's trying to guide you to ethical behavior. The actual law is very murky on what is illegal and prosecutors/SEC like it that way. This whole discussion is partly driven by the ambiguity of insider trading laws.

[/ QUOTE ]

the correct CFA answers for 2 and 3 would definitely be no. for 1, i'm not sure.

[/ QUOTE ]

Seriously, think again. Overhearing, reading accidentily, etc, all count as knowing. It doesnt matter if it was your intention or not to be in posession of this stuff. And 'lamenting the bad earnings' could it be any more material than this?
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  #37  
Old 11-27-2007, 04:13 AM
Rotating Rabbit Rotating Rabbit is offline
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Default Re: Is This Insider Trading?

[ QUOTE ]
[ QUOTE ]


Im doing CFA level 3 and i believe the CFA answers would be yes, yes, yes as well.

For anyone whose interested, the cfa definition is to the best of my memory "if you ACT with the intention of profit with the use of MATERIAL, NON PUBLIC information" its bad.

In all these cases, the information is surely both material and non public.

[/ QUOTE ]

If the CFA program says that, then I believe it isn't trying to teach you what the law is, it's trying to guide you to ethical behavior. The actual law is very murky on what is illegal and prosecutors/SEC like it that way. This whole discussion is partly driven by the ambiguity of insider trading laws.

[/ QUOTE ]

yeah you hit the hammer on the head there. CFA rules are in nearly all circumstances more extreme than the law.
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  #38  
Old 11-27-2007, 05:53 AM
David Sklansky David Sklansky is offline
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Default Re: Is This Insider Trading?

[ QUOTE ]
[ QUOTE ]
1. Favorable clinical trials at my company haven't been announced yet. So I can't buy the stock. But I short a competitor's stock.

2. I'm at a pay phone and I overhear the president of IBM lamenting the surprisingly bad earnings for this quarter as he speaks to the chairman on the neigboring phone. I short IBM.

3. I hear two apparent terrorists in the neigboring booth at a restaurant talk about throwing a bomb into the Wynn casino every day for a week. I notify the FBI but I also short the stock.

[/ QUOTE ]


you are using material nonpublic information to make bets on the market. are you dumb, this is all so cut and dry insider trading.... you understand that the idea behind insider trading is that you abuse the system and take advantage of NONPUBLIC information.

[/ QUOTE ]

So how come most of the people on this thread are saying 2 and 3 are almost certainly NOT insider trading? Since they have more knowledge of the subject than me, and since I am dumb for not realizing that all three cases are clearly insider trading, then the only possible answer to my question is, "they are imbeciles".
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  #39  
Old 11-27-2007, 07:35 AM
Esection Esection is offline
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Default Re: Is This Insider Trading?

1) Yes
2) Yes
3) Yes

in every circumstance you are privy to information that is not public knowledge. when you act on this information you are committing insider trading.
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  #40  
Old 11-27-2007, 10:12 AM
stinkypete stinkypete is offline
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Join Date: Jul 2004
Location: lost my luckbox
Posts: 5,723
Default Re: Is This Insider Trading?

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]


Im doing CFA level 3 and i believe the CFA answers would be yes, yes, yes as well.

For anyone whose interested, the cfa definition is to the best of my memory "if you ACT with the intention of profit with the use of MATERIAL, NON PUBLIC information" its bad.

In all these cases, the information is surely both material and non public.

[/ QUOTE ]

If the CFA program says that, then I believe it isn't trying to teach you what the law is, it's trying to guide you to ethical behavior. The actual law is very murky on what is illegal and prosecutors/SEC like it that way. This whole discussion is partly driven by the ambiguity of insider trading laws.

[/ QUOTE ]

yeah you hit the hammer on the head there. CFA rules are in nearly all circumstances more extreme than the law.

[/ QUOTE ]

the CFA ethics section always has "reasonable" answer options that are more "extreme" than the correct answer. #3 is a great example of the type of question where the "common sense" answer - where you think it's pretty clear what the "ethical" thing to do would be - is not correct.

#2 isn't clear enough because sklansky wasn't clear about what he actually heard, but given the way its worded there isn't necessarily any material information there.
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