
Three Equifax Managers Sold Stock Before Cyber Hack Was Revealed - QUFB
https://www.bloomberg.com/news/articles/2017-09-07/three-equifax-executives-sold-stock-before-revealing-cyber-hack
======
korethr
So, does this count as insider trading? My intuition says 'yes'. But my
intuition about a thing and what the law says don't always match.

~~~
jdmichal
Insider trading is any trading performed using non-public knowledge.
Theoretically even a pre-scheduled trade could be insider trading, if it
relied on non-public knowledge which remained non-public until the time the
trade executes. Of course, that's a pretty hard scenario to concoct, so
generally pre-scheduled trades 3+ months out are considered safe for even
high-level insiders. Not to mention all the extraneous movement that might
happen within that same time period that could very well nullify any knowledge
advantage.

~~~
thephyber
Interesting fact: commodities were not subject to such a law in the USA until
Frank-Dodd Act. The rule was named for Eddy Murphy, who played a commodities
trader in Trading Places[1].

The reasoning, as I heard it, was that all farmers who hedged their own crops
with commodities trading, had some amount of insider knowledge just by looking
at their own farm/crop/weather. Stealing a data report before it is publicly
announced, however, seems like it would violate some laws. Paying to access
reports early seems to be a lucrative offering of some of the data providers.

[1]
[https://en.wikipedia.org/wiki/Trading_Places#Legacy](https://en.wikipedia.org/wiki/Trading_Places#Legacy)

~~~
toomuchtodo
If you haven't seen Trading Places, please please please make the time to
watch it. Its both educating and entertaining!

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dahdum
John Gamble (CFO) has been dumping heavily since May 20th
([http://www.reuters.com/finance/stocks/insider-
trading/EFX?sy...](http://www.reuters.com/finance/stocks/insider-
trading/EFX?symbol=&name=&pn=1&sortDir=&sortBy=)).

~~~
tunetine
Am I the only one surprised a CFO is making this amount of money?

~~~
toephu2
Yes. You must be a new college grad?

A CFO of a $17B company making $3m/year[1] is normal.

[1] [http://www.reuters.com/finance/stocks/officer-
profile/EFX/25...](http://www.reuters.com/finance/stocks/officer-
profile/EFX/2507742)

------
21
So one guy sold 1 mil of stock, the stock dropped 6%, so he avoided a 60k
loss. Let's say he expected a 20% drop, and he saved 200k.

If a were a millionaire, I wouldn't risk prison for 200k. Even the litigation
to avoid prison could cost 100k.

And this is the kind of thing you know all angles will be looked into (it took
a news agency a few hours to unearth this).

If he did it (insider trading), he is very stupid.

~~~
ceejayoz
Martha Stewart was a billionaire and wound up spending prison time over an
insider trading savings of $45,673. Logic doesn't always apply.

~~~
derekp7
I thought she went to prison for lying about her insider knowledge, not the
trading itself.

~~~
notfromhere
45k still landed her in prison though

------
stygiansonic
FTA: " _None of the filings lists the transactions as being part of 10b5-1
pre-scheduled trading plans._ "

Anyone with more knowledge: How normal is this sort of behaviour?

~~~
ringaroundthetx
Pretty normal. Their lawyers likely said that as long as they reported in (via
Form 3 and Form 4) then it would be complaint enough.

So this was still transparency, and its just fodder for reporters to debate
about, because without the Form 3 and Form 4 regulation, you would never know.

Cost benefit analysis.

~~~
abalone
Uh, what? As another comment noted, they possessed "material non-public
information" when they traded. Forms 3-5 just disclose the transaction, not
_the non-public information that we all just learned about._

This doesn't mean they are guilty of insider trading, especially if there is a
pattern of recent sales, but it certainly doesn't absolve them. Definitely
smarter to hold off on ad hoc trades until all material information goes
public -- or go with a scheduled plan.

~~~
ringaroundthetx
here are the sells

[http://google.brand.edgar-online.com/?sym=EFX](http://google.brand.edgar-
online.com/?sym=EFX)

All of the guys in question all own 40,000 more shares than the few thousand
they sold. Doesn't mean they weren't insider trading or avoiding losses, its a
good defense though.

Selling outside of a predefined schedule is always at risk of some scrutiny,
because they always have inside information.

Given the size of these sells, they probably need it to cover a margin call,
since its common for people to borrow against their shares. Would suck if
thats what it was because its damning for civil and criminal liability and
would have been likely necessary for their solvency.

Enjoy

------
ChuckMcM
That seems incredibly stupid. The CFO especially would be hard pressed to
convince anyone either that he 'didn't know' there had been a breach or define
himself as not an 'insider.' If the facts are as reported these folks are in a
world of hurt.

~~~
thephyber
It perhaps was stupid, but you forget that the burden of proof is the other
way around.

I was under the impression C-suites and directors had to file with the SEC in
order to sell stock. I'd wager they did and that's how Bloomberg found out
about it.

~~~
scottlamb
The burden of proof for criminal charges is the other way around. I can think
of a few ways he could "in a world of hurt" without being found guilty of
criminal charges; in fact without any formal burden of proof:

* A trial or even just discovery for a trial and having to pay lawyers more than he gained from selling this stock.

* Angry shareholders or even board members could demand consequences such as docked pay or termination.

* Negative media attention such as this article.

------
stuaxo
That reminds me I need to update my address on Equifax. I found out it was
wrong after being refused to be allowed to buy a mobile data plan (even though
I had all the cash it counts as a credit issue).

After 5-6 phone calls to get the address added to their system, I never did
the final one a few days later to get them to update me once it was in their
system.

Absolute bunch of arses.

~~~
thephyber
It's amazing how they make it difficult to give them more information.
Granted, you aren't paying them directly, but you are effectively making their
business more valuable by linking more accurate data to their profile of you.

------
tdeck
Aren't senior executives legally required to submit their trading plans well
in advance of any stock sale? That certainly seemed to be the case at my last
employer.

~~~
QUFB
From the article:

> None of the filings lists the transactions as being part of 10b5-1 pre-
> scheduled trading plans.

~~~
loeg
That doesn't answer the question. We all read that the trades were not planned
in advance. The question is, is that by definition illegal? Or were the trades
only illegal because they had insider knowledge that the price was about to
drop?

~~~
khuey
If they had access to material non-public information and then decided to
trade it would be illegal. Trades that are not planned in advance are not
illegal in and of themselves.

~~~
loeg
Do you think executives ever do not have access to material non-public
information?

------
mankash666
Credit reporting agencies are the cancer of the modern economy. They are rife
with inaccuracies, and on top of that, highly vulnerable to hacking , as
software engineering is just a cost for them, not their focus.

Their entire function needs to move to the blockchain. Their only value is
that of a distributed, trust less ledger, and they charge horrible fees and
sit in the middle for doing that terribly

~~~
wpietri
This strikes me as sadly typical of so many "just use a blockchain" plans: it
has a hopelessly naive understanding of the topic.

Credit reporting agencies aren't just a big ledger. They collect a lot of
information from a variety of sources, verifying and evaluating them. They
contextualize, evaluate, and summarize the information. They comply with
extensive laws that regulate the use of the information. And then they, with
obviously varying levels of success, control who has access to that
information.

This work all costs money. It could surely cost less. But dumping terabytes of
ungroomed personal data into a public database and then crossing our
collective fingers is a startling bad idea. (If you disagree, then please put
your last 5 years of financial statements, bills, and receipts unredacted in a
GitHub repo and put the link here.)

~~~
mankash666
This is a naïve interpretation of my comment. Here's a real product [1] that
considers all the pitfalls you enumerated, and achieves what I had in mind.
[1]: [https://hellobloom.io](https://hellobloom.io)

~~~
wpietri
It's a pretty straightforward reading of your comment.

Bloom is a fancier but also naive attempt. Nobody on that team has experience
with loan origination, loan underwriting, loan rating, loan syndication,
credit reporting, credit scoring, credit cards, debit cards, or debt
collection. Having read the white paper, it is weirdly specific on record
formats, and weirdly hazy on almost any important issue. It seems a fine
example of the XKCD cartoon about physics majors. [1]

Remember when somebody who built a Magic the Gathering card exchange and then
decided they could build a currency exchange? I'm not an expert [2], but
that's what the Bloom.io stuff reads like to me. People joke that Bitcoin is
basically the Dunning-Krugerrand, and things like Bloom don't do much to
challenge that view.

[1] [https://xkcd.com/793/](https://xkcd.com/793/)

[2] Although I have build financial trading software, worked on a loan
accounting system focused on the underbanked, and am currently consulting for
a commercial lender, so I'm not entirely ignorant.

~~~
mankash666
Again, your response is typical of incumbents in any sector. AirBnb founders
weren't hoteliers, Uber founders weren't taxi industry veterans. Everything
you know can be learnt from a book, or obtained by hiring someone like you -
and there are PLENTY of your kind to hire.

Now, for every successful Uber, there have been 100 failed attempts at the
same. Will HelloBloom be the Uber of credit reporting- can't say. But will
credit reporting be disrupted by someone like Hello Bloom, definitely.

~~~
wpietri
I'm not an incumbent in the industry. Nice try, though.

My issue here isn't with industry disruption, which I generally like. It's
with hallucinatory blockchain-based hype. For years I've been hearing that
Bitcoin or some other blockchain technology will disrupt money transfer and
online purchasing. But Bitcoin never got any foothold in international
remittances and is actually in retreat in e-commerce. Now the Bitcoin hype had
metastasized into blockchain and ICO hype, but I don't think there's any more
meat to it.

But if you're so sure, let's put money down. I have $500 that says no
blockchain-based startup will get even 1% of the US credit reporting market in
the next 5 years. We can put the bet up here:
[http://longbets.org](http://longbets.org)

You in?

~~~
wpietri
You reply:

>

Yeah, that's what I thought you'd say.

------
to_bpr
If this is deemed to be illegal then so be it, may the law deal with them.

If not, I think it'd be hard to say that in the same situation I wouldn't do
the same.

------
konceptz
So the company stated that they (3 of them) did not know about the breach.

I'm interested in what it takes to begin an investigation?

~~~
kevin_thibedeau
[https://denebleo.sec.gov/TCRExternal/index.xhtml](https://denebleo.sec.gov/TCRExternal/index.xhtml)

------
torbjorn
If they wanted to do insider trading why would they sell only a small portion
of their shares?

------
rshm
Is it possible or are there free data sources if an average person wants to
dig into tradings of Jul 27, two day before official date of discovery.

~~~
jannes
No, that's not possible. These trades are only public because there is
regulation that mandates Equifax to file trades by their employees above a
certain level.

Statement of Changes in Beneficial Ownership:
[https://en.wikipedia.org/wiki/Form_4](https://en.wikipedia.org/wiki/Form_4)

Otherwise you have this trading information spread across thousands of brokers
(and it doesn't become public)

------
wdewind
Wouldn't they have scheduled these trades months in advance like most
employees of public companies with insider trading policies?

------
cprayingmantis
Equifax was down for a long time the other day. I should've treated that as a
signal to short the stock...

------
coffeemug
How many Equifax managers are there trading? Could this be law of large
numbers?

------
carbocation
Out of curiosity, how would I go about looking this up?

~~~
thephyber
Someone else in this thread linked to:

[http://google.brand.edgar-online.com/?sym=EFX](http://google.brand.edgar-
online.com/?sym=EFX)

------
kin
This is all kinds of unethical.

~~~
RawData
Nope, this is more likely all kinds of illegal!

------
anigbrowl
Smart guys, they can get a presidential pardon. Great guys, the best.

------
dingdongding
Hello insider trading !

------
mnm1
The only reasonable punishment for this is decades in jail. If they can't put
these assholes in jail for running the credit check companies themselves, at
least convict them for insider trading. These businesses should not exist to
being with. I'm not sure what the penalty for insider trading is, but if the
prosecutors a little creative, they could convict for each share sold. That
should keep these scumbags in jail for the rest of their lives. Oops, I must
be dreaming again ...

~~~
thephyber
> If they can't put these assholes in jail for running the credit check
> companies themselves

Who is "they"? You realize Congress has effectively cemented the place of the
big three credit bureaus in the daily life of all Americans, right?

