Example: you are an executive at E Corp and the company will announce its acquisition in two months. You had previously set up planned trades to sell x number of shares each month before then. Because the acquisition is at a premium on the current price, you will make much less money if you go forward with your trades before the announcement. So, what do you do? You cancel the trades.
Was this insider trading according to the SEC? Surprisingly, no! Even though you're profiting from insider information, the SEC rules are such that for insider trading to occur, you actually need a trade.
Martha Stewart did exactly this before her company was acquired earlier this year:
Not viable -- think how many options e.g. Google would have to own on e.g. Microsoft to meaningfully move the needle at Google.
I think you're right overall, though. "Buy exposure to a symbol you are not allowed to trade in." is easy if a) there exists an ETF which you are allowed to trade in, b) you know what the constituents of the ETF are and what their weighting is (trivial), c) you can program a computer to successfully do 4th grade math, d) you are good at trade execution (highly non-trivial).
Of course, the answer to that is to require all Congressmen to put their assets in a blind trust.
How about disallowing them to trade altogether in the first place for as long as they hold office?
The answer is NOT to give them free reign to do it. It's to prevent them from being allowed to choose stock investments entirely. They get enough perks, they don't need free reign over the market.
I agree that public disclosure of their trades is viable, because if they decide to trade based on information they have, the public (whom they _serve_!) should also get the same opportunity.
You can go here and make copies.
Are you telling me that until 2012, for every confidential hearing that American congressman could attend, every budget proposal or allocation they had to vote on, every bill (say on the environment, or regarding corporate or financial regulation) they had to pass, or every declaration of war they had to approve, they were allowed to choose the outcome and personally profit from it?
The only study on the performance on Congressional stock portfolios is from 2004 . Do you know of any post-STOCK studies?
: Ziobrowski, A.J., Cheng, P.X., Boyd, J.W., and Ziobrowski, B.J. (2004) “Abnormal Returns from the Common Stock Investments of Members of the United States Senate.” Journal of Financial and Quantitative Analysis, Vol. 39, No. 4, pp. 661-676. (http://www.walkerd.people.cofc.edu/400/Sobel/P-04.%20Ziobrow...)
"Congress Quickly And Quietly Rolls Back Insider Trading Rules For Itself"
"It was such a national risk that Congress did the whole thing quietly, with no debate. The bill was introduced in the Senate on Thursday and quickly voted on late that night when no one was paying attention. Friday afternoon (the best time to sneak through news), the House picked it up by unanimous consent. The House ignored its own promise to give Congress three days to read a bill before holding a vote, because this kind of thing is too important to let anyone read the bill before Congress had to pass it."
"Still, two major elements of the law remain. Insider trading is illegal, even for members of Congress and the executive branch. And for those who are covered by the now-narrower law, disclosures of large stock trades are required within 45 days."
That's only for staff. The reports for Congress members are still required to be available online. They are here .
This would then lead to the question: am I an insider trader if I am basing my options off of the lack of sales of insiders?
This second case seemed more nutso to me than the first, but both are true -- I've lived them.
I don't know if everybody was covered, but everybody in my group was.
NEVER TALK TO THE POLICE WITHOUT YOUR LAWYER.
So in this case you had a sell order planned over the next few months but now you know the shares will increase in value after the date of the scheduled sale so you cancel the sell plan. This is considered legal because you did not use your insider information to actually trade stock only to refuse to trade stock
then the good trades weren't insider trades?
So it is more effectively the same as deciding not to do what you have been doing every month. It would be impossible to enforce a prohibition against that, as that would effectively be a requirement to sell.
So? That hardly seems impossible to enforce. You just don't allow cancellations unless they are also planned. If you're allowed to schedule recurring sells, say, 30 days in advance (I don't know what the specific rules are), you should only be able to cancel them with 30 days advance notice.
The whole point of the planned trade exemption is to allow trades to happen independent of insider knowledge. If you allow cancellations, you're allowing insider knowledge to impact the trading.
Why would that be impossible to enforce? If you register a planned trade with the SEC you have to follow through with it or pay a fine equal to the amount of money you saved by not going through with it.