This seems reasonable to me - insider trading is not “buying or selling your own shares” it’s buy or selling based on information that is not publicly available that will materially impact share prices.
As the article states the issue is there’s no formal legal definition of insider trading but also there’s stuff like “I’m working on a new product that I think will be great so I bought stock” vs “I’ve heard this new product will be delayed so sold it”, and I still don’t fully understand an unambiguous definition or what point it becomes criminal.
That said this case seems cut and dry, their employment contract explicitly prohibited them from trading in stock of any company if they had non public information that could impact price, and they made the trades 7 minutes after learning the information[1]. It’s hard to see how they could plausibly argue they did not at minimum breach their employment contract, if nothing else.
[1] “ The SEC said two facts about Panuwat’s 2016 trading showed it was illegal. First, his employer had a policy that forbade trading other companies’ shares when employees had material nonpublic information about Medivation.
Second, Panuwat traded on his work computer just seven minutes after he allegedly learned that Pfizer was ready to buy his company.”
> That said this case seems cut and dry, their employment contract explicitly prohibited them from trading in stock of any company if they had non public information that could impact price, and they made the trades 7 minutes after learning the information[1]. It’s hard to see how they could plausibly argue they did not at minimum breach their employment contract, if nothing else.
It does seem cut and dried that he breached the employment contract. That is very different from being found guilty of a crime though (this was a criminal case).
I'll be interested to see how this and other cases on the edge of insider trading turn out. Things get murky when someone relies on correlations between stock prices (and this fellow lost money on some of the options he sold just a few weeks later, which indicates how imperfect the correlations can be).
Oh I’d swear when I read the article it said it was a civil case (I assume I misread?) - in that case the cut and dryness of guilt (where guilt is criminal) seems more interesting.
In that case maybe the employment contract was presented as evidence that they knew they were not permitted to engage in this kind of trade, to undermine a “I didn’t think this was wrong” defense? But yeah criminal vs civil does change things a bit.
Me too, because Matt Levine's take is usually that insider trading requires a duty to shareholders[1], not just non-public information. From that pov it sounds like this wouldn't be insider trading.
Correct me if I misunderstood his normal position.
[1] he also usually adds the explanation that insider trading is about theft, not fairness. Meaning that if you obtained information which is not public by means of your own research, that would not be insider trading, because you have no duty to the shareholders.
Or the Court of Appeal's take. I was surprised that defendant's counsel didn't say commit to appealing the decision. I would think that a novel issue like this would be the perfect one to take up on appeal. Perhaps the issue is that the 9th Circuit is not as likely to reverse this decision, and the cost (in legal fees) of getting to the Supreme Court is relatively high in comparison to the penalties assessed.
As the article states the issue is there’s no formal legal definition of insider trading but also there’s stuff like “I’m working on a new product that I think will be great so I bought stock” vs “I’ve heard this new product will be delayed so sold it”, and I still don’t fully understand an unambiguous definition or what point it becomes criminal.
That said this case seems cut and dry, their employment contract explicitly prohibited them from trading in stock of any company if they had non public information that could impact price, and they made the trades 7 minutes after learning the information[1]. It’s hard to see how they could plausibly argue they did not at minimum breach their employment contract, if nothing else.
[1] “ The SEC said two facts about Panuwat’s 2016 trading showed it was illegal. First, his employer had a policy that forbade trading other companies’ shares when employees had material nonpublic information about Medivation. Second, Panuwat traded on his work computer just seven minutes after he allegedly learned that Pfizer was ready to buy his company.”