Regulatory filings show that three days later, Chief Financial Officer John Gamble sold shares worth $946,374 and Joseph Loughran, president of U.S. information solutions, exercised options to dispose of stock worth $584,099. Rodolfo Ploder, president of workforce solutions, sold $250,458 of stock on Aug. 2. None of the filings lists the transactions as being part of 10b5-1 scheduled trading plans.
The three “sold a small percentage of their Equifax shares,” Ines Gutzmer, a spokeswoman for the Atlanta-based company, said in an emailed statement. They “had no knowledge that an intrusion had occurred at the time.”
The timing is very suspicious, but if they can prove that they had no knowledge, then they are safe. Given their titles, that seems like a dubious claim.
I agree the timing is suspicious, but the amounts are pretty small. Even if the stock drops 20% long term due to this (which IMO is highly unlikely), a high ranking executive risking a jail term to avoid losing 50k of stock is (again IMO), absolutely irrational.
After a highly publicized six-week jury trial, Stewart was found guilty in March 2004 of felony charges of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators
Take the "making false statements to federal investigators" one for example, the "false statements" don't have to be at all related to the investigation (or eventual prosecution) at hand, they could have nothing to do with her personal financial matters, they just have to something you say that was not true during the course of the investigation.
Or "conspiracy" and "obstruction", both have a long history of providing law enforcement and prosecutors plenty of leeway to take punitive measures regardless of the feasability of the original case.
Very similar to the long history of 'resisting arrest' and 'assaulting a police officer' being used on a more localized level whenever a citizen did not show total obedience to police, regardless if they committed a crime or not.
More so considering that prior to the sale John Gamble (the CFO) hadn't sold a single share in the three years that he has been with the firm.
You act as if this is a real senario and would have a non-negligible probability of occurring.
Is that true? What do you mean by "all the time"?
If whoever owns those options exercises them today (And covers their short position at a price of $125) they will make ~$2.5m on a ~$200k bet.
This is why the options market is the first place regulators look on insider trading.
I wish more people on this forum recognized this
Someone who has deep understanding of the letter of law and uses it to semantically defy the spirit of the law (like tax evasion by exploiting loopholes that were not designed for their use case) do, in my opinion, deserve criminal punishment.
The tax code was designed to tax entities who use more than their fair share of public resources to make private profit. Think about the legions of WalMart semi-trucks ripping up highways that most taxpayers pay for; it gets to profit from its use of infrastructure that it uses way more of than the average taxpayer.
Obeying the intent of these kinds of laws as they were written originally requires ethics that many corporate individuals simply don't have.
From a trade policy perspective alone we have plenty of supporting evidence among developed countries of self-serving policymaking. Ha-Joon Chang, economist at Cambridge, has written several books criticizing neoclassical economics policies commonly used by both left and right wing policy makers across many developed economies including one literally called "Kicking Away the Ladder" describing how an alarming trend for developing countries to make trade and domestic economic policies that close off tools these countries used themselves to grow their economies. A recent case of not following conventional policies and playing into the hands of the ultra wealthy is Iceland following their real estate collapse and now subsequent rebuilding on their terms as suggested by economist Michael Hudson, another critic of neoclassical economic policies.
Regulatory capture is one of several by-products of cronyism and an oligarchical rather than impartial, equal opportunity system but even in a toy case study in sports there is clear evidence of bias with regulatory experience http://onlinelibrary.wiley.com/doi/10.1111/coep.12240/abstra... If there's policymaking and enforcement bias over time in something with as little consequence as sports but also certainly fiscal motivators (for teams, NHL Commission, etc) it would be strange if our government policies would be exempt from the same human dynamics that is specifically meant by those with hidden information to stay obscure and hidden. But not a whole lot of grant funding out there to investigate corruption exactly, so rigorous academic research on corruption, regulatory capture, and other perversions of capitalist society is sparse, oftentimes difficult to get solid data, and thus difficult to cite in a random Internet comment to the satisfaction of pedantic critics that react to defend any assailment of the much-maligned wealthy.
I'll omit the studies showing those with wealthier backgrounds showing tendencies toward far more loose ideas of lawfulness and fairness compared to the general population.
Also, I wrote it partly tongue-in-cheek in tone responding to a potentially more inflammatory, generalized, presumptuous comment and somehow that was ignored?
If there's a history of these execs selling similar amounts of stock in other quarters, then it's probably not insider trading.
If the paperwork trail started an hour after the first meeting where they learned about the breach, and they had never sold stock before, then it's probably insider trading.
Since the truth is somewhere in between, it's hard to say. It's hard to believe that these people didn't recognize the optics of what they were doing. But, that's why we have investigators and courts.
It would be highly unusual for the CFO not to have the burden of confidence but even for a division president it's not clear they'd have corporate officer responsibilities.
During compliance training in my old life they covered the classic "overheard in a coffee shop" example as a way to highlight that a barista does not owe confidentiality to a random public company. However, I don't think it's ethical behavior regardless of whether it'd result in a conviction.
That's what 105b-1 trading plans are for. If they had used them there would be no questions to ask.
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.
What would happen if a Executive found out about a data breach, sold some stock, but when the breach was announced later the stock price remained flat or went up (just for the sake of argument). Would that still be insider trading?
Public companies typically have scheduled sales of their options for people at this level. This was not that.
If you end up being right, it will have been almost pure luck, but it may reinforce certain incorrect assumptions, like your theory that this single criteria was the deciding factor, or that this kind of armchair analysis is productive.
Point being: even if you are right, it's probably a bad idea to even take the position to begin with.
However, whether these managers broke the law and if and how they should be punished is a legal question most people here should probably shut up about.
Moreover, is there a law about impersonating lawyer in a public forum (not that any ethical person would do that of course)?
Claiming that you are someone you're not on the Internet is so commonplace it is hard to see where any trouble would come of it by itself. Again it's different if you knowingly cause harm to others.
I'm not a lawyer. This is not legal advice. Or maybe I am and it is. Who knows.
In most (all, I think) US jurisdictions, providing legal advice is practice of law, and doing it without a license to do so in the state is prohibited (usually, a crime.)
This isn't not legal advice and I am not a lawyer. Consult an actual lawyer licensed in your state before deciding whether or not you should provide legal advice.
Legal advice should be limited to someone who is an attorney. There are ways around that giving of advice, you can say, "if air were in that position I would do xyz." Or "when that happened to me my attorney said I should xyz."
Practicing law without a license is a crime albeit one not often prosecuted unless you are representing yourself as an attorney and in most cases that involves the transfer of monies for those legal services but not always.
Or, "free legal advice is worth what you paid for it."
There is a reason that lawyers online are very quick to point out that they are not opening up such a relationship.
So they give legal advice, then the person reads the advice, and acts on it. If it's wrong then they can sue.
It's mostly to remind people to not trust advice on the internet. While the person giving legal advice might be correct, they haven't read and understood the law with the legal background a lawyer has.
I've always taken it as "I want people to assume that I know what I'm talking about, unless there are negative consequences. I still want to chime in, though." That said, I'm not a sociologist, and you should procure advice from an expert before forming opinions about people on the internet you've never met.
A CFO of a $17B company making $3m/year is normal.
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.
This is part of the reason why you aren't a millionaire. Wealth selects for people who do some strange things to make a little extra money here and there... and there... and there... and there....
It's also why people who aren't like these millionaires (whether of similar means but less wealth or of greater means but fewer questionable choices) think some millionaires make foolish, cruel, or inhumane decisions.
Wealth is indeed a proxy measure for certain behaviors, but you're ignoring other even more important behaviors like impulse control and an eye for risk analysis.
Most of us aren't wealthy because we engage in unethical practices; we're wealthy because we understand long term planning and self control.
Here's a related article you might find interesting about the link between self control and wealth. Note as well the negative correlation between wealth and crime, which stands in opposition to the association you attempt to draw above.
You are pointing the arrow in the wrong direction.
>>which stands in opposition to the association you attempt to draw above
What is under discussion is whether rich people are more likely to do illegal things (maybe because they felt they can get away with it) or they are less likely to do illegal things (maybe because they are risk averse and have more to lose).
You've made a mistake.
I stand by my original statement regarding correlation. Your assumption that there's a causal claim is your own mistake. This has been made clear; there's nothing further for us to discuss. Especially given your uh, personality.
The real trouble is if you are having a streak of luck, you would be absolutely certain there is no reckoning for your deeds coming, this could go on, until it doesn't.
At that point in time punishment/prison looks a heavier price to pay in return for a incremental gain.
It's important to distinguish likelihood from impact. The heavy impact is "prison"; a lighter impact is a civil suit from the SEC or a similar regulator. The likelihood is unknown right now. It probably went up the second Bloomberg published this article, so it might have been a better decision a few days ago.
The SEC seems to settle for civil penalties more often than the FBI prosecutes for jail time. Sadly, it's more likely that at least 3 managers will probably spend $200k on lawyers to navigate their statements to the authorities over the next few months.
edit The $60k profit will probably also have to defend them against lawsuits by other stockholders.
I don't know what's fair here.
How can anyone prove that they wouldn't have sold some amount of stock in the nearly 6 months since the hack started? How does a prosecutor prove intent without a very damning self-incriminating statement? Certainly $1m in stock sold at a _very_ suspicious time makes me want to blame this guy, but what if he knows he's getting laid off this week? Does that change the calculus of intent?
IANAL, TINLA, etc.
I remember a few commentors on HN recently saying they have made large gains by buying stock of companies after the news of cyber security breaches significantly reduced the share value, then waiting for the dust to settle(reaction-news-cycle to complete) and the price to rise again.
So what's it going to look like 6 months from now? Your guess is as good as mine. Mine is: either absolutely nothing happens and the stock goes back up, or this finally gets something to be done about the garbage that is SSNs and/or credit reports (in which case I can't really imagine what happens to the stock price in any direction).
Anyone with more knowledge: How normal is this sort of behaviour?
(IANAL, this is not legal advice, etc etc)
10b5-1 plans set up by the company will sometimes have a rule that no changes are allowed for 30 days, which solves the problem. Not sure how widespread this practice is.
Or something along those lines, I'm not high enough level to have to deal with the specifics so I only know the generalities I picked up while trying to determine if I needed to care.
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.
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.
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.
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.
* 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.
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.
> None of the filings lists the transactions as being part of 10b5-1 pre-scheduled trading plans.
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
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.)
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. 
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 , 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.
 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.
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.
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
Yeah, that's what I thought you'd say.
Also, the credit agencies, for better or worse, weigh the different factors in a credit profile, to provide an approximation of an individual's credit worthiness. This information from a credit bureau is solicited by many lenders who are providing the credit.
Your name is on the chain, the assertion you're you is done with your private key.
Point is, key management is hard problem for big corporations with dedicated IT staff. Relying on normal people to be able to do that is just insane.
It was all just a test with non-critical data, but the test was a total failure. And that didn't even get into key-related issues.
At least credit agencies can remove inaccurate information from your report. They don't make it easy, but they can do it. In a blockchain, how would that be possible?
That said, I don't know how I feel about replacing credit bureaus with a distributed database. The issue still revolves around verifying identity and reputation. The blockchain doesn't solve identity. Perhaps it could solve the reputation problem... of a cryptocurrency wallet. How does a merchant know that their current customer doesn't just burn the reputation of a wallet and create another wallet?
I see BitCoin has being a masterful synergy of several existing algorithms and theories. But it's a lot like a 4-legged chair. I've yet to hear a great use of blockchain (other than a cryptocurrency) which supports the chair with all 4 legs. Some proposals would be better served as just a distributed database, others don't benefit at all from being distributed. Some simply don't have an incentive for miners to spend on the electricity needed for Proof of Work and will inevitably suffer from one company consolidating a majority of the network -- thereby compromising the value of the consensus algorithm.
Perhaps they are overcharging, but they aren't serving a trustless function.
If not, I think it'd be hard to say that in the same situation I wouldn't do the same.
I'm interested in what it takes to begin an investigation?
Statement of Changes in Beneficial Ownership:
Otherwise you have this trading information spread across thousands of brokers (and it doesn't become public)
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?