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Insider Trading: Dear “Guy Speaking Behind Me In the Loud Voice…”

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5 Responses

  1. Kaimi says:

    This is a perfect illustration of the drive-a-truck-through-it gap that Chiarella+O’Hagan leaves in insider trading law.

    The hypothetical I always use in teaching O’Hagan is along the lines of:

    “You’re walking down the street, and a piece of paper suddenly blows out the window of the office building next to you, and lands at your feet. It reads, ‘The merger is going to happen tomorrow’ . . . “

  2. Mike says:

    What interests me is the attention Securities Regulations (the law-school course as well as the enforcement by SEC) pays to insider trading. That issue gets so much play, when the real action is in high-frequency trading; dark pools; flash orders; expert panels, and Goldman Sachs’ “trading huddles.”

    Talking about insider trading is almost quaint.

  3. A.J. Sutter says:

    This carelessness was a way of life in Silicon Valley during the dot-com period. My favorite example was when I visited the men’s room of a Palo Alto movie theater where the CFO of a company took a call on his cell phone while sitting in a stall, and started discussing not-yet-released financial statements with a member of his staff. The metal-walled, open-top stall acted like a megaphone. Even worse, at the time some of the biggest law firms in the Valley (Cooley, MoFo and a couple others) were in the same office complex as the theater. I wasn’t familiar enough with that particular niche in the software business to identify the company, but there were enough names and substantive remarks that for sure someone else in that men’s room could put the pieces together.

    You’re right that airports give a false sense of security — even overseas. A few years ago I was noshing on some pre-flight sushi in Narita airport (which serves Tokyo) when a bunch of Americans walked into the restaurant and began talking very boisterously about their recent negotiation with a Japanese company, and strategy for next steps. I recognized immediately that they were from a particular public company in which my company had made a venture investment (we were also a customer), esp. since the loudest guy was the VP of marketing, whom I’d met. I walked over, introduced myself, and suggested they shut up about business for a while. Anyone in the electronics business could have figured out where they were from — there were only 3 global competitors in that company’s space, and it was obvious from their talk that they weren’t from the either of the other two. And many of the other foreigners in the airport restaurant had come to Japan because electronics was exactly the business they were in.

  4. A.J. Sutter says:

    I just noticed Mike’s comment: Profitability isn’t the sole relevant criterion. One reason insider trading should get so much play in law school is because it’s one of the crimes often committed by lawyers.