It seems to me that "insider trading" should be viewed as a form of embezzlement. Employees of a firm work for the owners of the firm (the shareholders). The owners of the firm choose to compensate those employees in a variety of ways -- salaries, bonuses, stock options. In exchange for that compensation, the employees of the firm are supposed to do work to maximize shareholder value.
If the employees of the firm use their knowledge of the firm to take money from the owners beyond what their employment contract specifies, that is embezzlement. For example, if a cashier takes money from the cash register based on his knowledge of how to open the cash register, that's stealing from the owners and it is rightly illegal.
If an employee of the firm knows that a new product has major production problems and uses that knowledge to short the stock, he is essentially taking money from the owners of the firm above and beyond what his employment contract calls for. It seems to me that should also be illegal.
But what if instead of shorting the stock, the employee sells the information about the production problem to someone who is representing some (but not all) of the owners of the firm? Seems to me that is what's going on here, and that it's still a problem. Go back to the cashier analogy -- what if instead of taking the money from the cash register only for himself, the cashier shared some of it (perhaps even most of it) with one of the owners of a store but not the other. So in that case, the cashier isn't purely stealing from the owners -- he's helping one owner steal from the other.
But with these analysts, at least some of them, they seem to report their information to the public. So they aren't (at least not always) reporting their information to some owners but not others. At least in those cases -- where the information is made available to everyone -- I think this could be a net positive for shareholders, since it gives them more information than they would have otherwise had.
SEC is investigating Wall St. analysis for having "eyes" and "brain". Also under suspicion are a class of new electronic devices, "phones".
This is retarded. The SEC completely missed the sub-prime and CDS/CDO meltdowns because they didn't understand them, and this is how they're going to fix it? By punishing people for improving transparency?
I can understand how checking with suppliers would seem like unfair insight into the plans and pulse of a company, but to call it 'insider trading' is a bit much. Going by the definition mentioned in the article the only sources of information for investors are information the company itself authorizes for release and the historical data of its past performance. Investors should be allowed the ability to receive a wider, more objective picture of a entity's worth and future than just the information the entity wishes to let them know.
The company I work for encourages us to become knowledgeable around insider trading and has given us some training in that area. It's a very worthwhile exercise. What the SEC is looking at in this case certainly seems to fall within the realm of insider trading.
It's generally illegal to trade securities in a company where you've been exposed to non-public information that could effect a company's stock price, even if you didn't willingly go out and get that information yourself. Non-public sales and production data definitely can influence a stock price.
I understand a couple of the comments in the thread about Apple not being as transparent as they would wish on some of this data. However, Apple, like all companies, has to comply with all kinds of financial disclosure rules and I can't imagine they wouldn't be. If what they disclose is not sufficient in your mind then probably the best recourse is to find other companies to invest in where the level of public data is higher.
Please remind of this crap the next time the SEC whines about not having enough staff or budget to cover the absence of oversight of crooks in the investment and banking industries.
America's political priorities continue to be a farce.
The one analyst that has nothing to worry about is Gene Munster. He has been wrong so many times that he could never be accussed of having insider info.
When you consider this is AAPL we are talking about, I'm not surprised. The stock of what is nearly and soon could be the largest company on planet Earth by market cap it is hardly a shock that there will be illicit behavior afoot. Like so many of these things, many illegal financial practices start off as a small incidence that someone gets away with, perhaps even accidentally. Then they repeat and it becomes a pattern.
Please remind of this crap the next time the SEC whines about not having enough staff or budget to cover the absence of oversight of crooks in the investment and banking industries.
America's political priorities continue to be a farce.
Somethings have to be done to repair the damage done by almost a decade of greed and deregulation. Not that I am saying this is it mind you. It can't all be fixed in two years, but lets not drag politics into this too far eh?
The whole stock market is stacked against the individual trader, and is rigged from top to bottom. Getting involved is a fools paradise.
For example
a) If a trading company makes a purchase, it is executed in an instant. You do it, and it take a few minutes. So you are not playing on a level field.
b) The trading companies have computer programs that do "hands off trading" to scrape off every cent they can of a short drop and rise. Its like you vers. a supercomputer.
c) The financial models that make the big money are designed by very smart guys who are overpaid for the social value they perform in our society, allowing them to leave their morals behind. And they never go to jail, you might pay a fine ( but never have to admit to wrongdoing) and just might be able to get into the big money, politics.
They tell you its a gamble to play the stock market. It is only a gamble if you are a small investor. It is a well oiled, money making, secret black box if you work for a fund. And why? There is to much money involved to leave it to chance. That would be illogical.
While I agree that insider trading is an issue and stock manipulation even worst, I see it as a very sad day if one can't have a discussion with a shop keeper about business or sales. Really what is next, will they make it illegal to sit outside a store and count boxes leaving?
Ultimately stock holders need solid information about sales to value a company and understand customer acceptance of it's products. Waiting for quarterly reports leads to abuse by the management teams of public companies. Certainly there are recent example in the auto industry here and in the past in the computer industry. In fact it makes me wonder how a company can legally keep sales figures from stockholders.
Spot on.
I too have mixed feelings about this. The definition of what constitutes 'insider information' is so loose so as to give the government sweeping powers.
Moreover, it is not as though speculation on Apple stocks and guesstimates of its fundamentals is going to magically disappear if analysts stopped doing channel checks: the information quality (such as it is now) will get even worse, leading to even greater volatility for AAPL.
Insider Trading rules are a bit crazy in the US - home of the once free enterprise. Officers of companies, their relatives etc. should be subject to insider trading laws. These guys are external investigators into Channel, talking to suppliers. Cant see them as employees of Apple.
Meanwhile the SEC did little to stop the bubbles, Lehman, and/or Madoff despite having a report on their desks about Madoff. This is easy pickings, it is not insider trading ( by any sane definition) and these guys actually produce some service to normal traders.
Please remind of this crap the next time the SEC whines about not having enough staff or budget to cover the absence of oversight of crooks in the investment and banking industries.
America's political priorities continue to be a farce.
Yes over-regulate on minor infringements, and ignore the rest.
Paying someone for insider information is always a problem.
This is where I as a stockholder has huge problems. Sales figures really shouldn't be secrete, as investors have no ability to make informed decisions about the stock. Worst there is a history of management teams doing bad things when the data isn't that good. From the standpoint of an investor, waiting for quarterly reports is not acceptable.
I agree that you rase a very valid question.
I don't claim to understand where the line is between legal information gathering and insider trading, so I would be hard pressed to get involved in a discussion about exactly what sort of information gathering should be legal. I can see good arguments for more information being made available (who doesn't want more transparency out there) and I can see good arguments for Apple wanting to be able to keep secrets (everybody seems to be copying them all the time--shouldn't they at least have a head start?)
Quote:
As to the Obama hater one could see this as another element in what is becoming a very repressive government.
This is where I believe it gets silly. Represive? Really? I suppose people see what they want to see and everyone believes what they want to believe. But if this is where you need to go to fine evidence of "repression" it seems that you are really grasping at straws!
It seems to me that "insider trading" should be viewed as a form of embezzlement. Employees of a firm work for the owners of the firm (the shareholders). The owners of the firm choose to compensate those employees in a variety of ways -- salaries, bonuses, stock options. In exchange for that compensation, the employees of the firm are supposed to do work to maximize shareholder value.
If the employees of the firm use their knowledge of the firm to take money from the owners beyond what their employment contract specifies, that is embezzlement. For example, if a cashier takes money from the cash register based on his knowledge of how to open the cash register, that's stealing from the owners and it is rightly illegal.
If an employee of the firm knows that a new product has major production problems and uses that knowledge to short the stock, he is essentially taking money from the owners of the firm above and beyond what his employment contract calls for. It seems to me that should also be illegal.
But what if instead of shorting the stock, the employee sells the information about the production problem to someone who is representing some (but not all) of the owners of the firm? Seems to me that is what's going on here, and that it's still a problem. Go back to the cashier analogy -- what if instead of taking the money from the cash register only for himself, the cashier shared some of it (perhaps even most of it) with one of the owners of a store but not the other. So in that case, the cashier isn't purely stealing from the owners -- he's helping one owner steal from the other.
But with these analysts, at least some of them, they seem to report their information to the public. So they aren't (at least not always) reporting their information to some owners but not others. At least in those cases -- where the information is made available to everyone -- I think this could be a net positive for shareholders, since it gives them more information than they would have otherwise had.
Definitely a tricky issue, I think.
Let us see:
If the Wall Street Apple Analyst makes these comments to manipulate the AAPL stocks so that his company or his associated company tries to take advantage of the situation either to decrease or increase the value of the AAPL stocks, to gain monetary advantage is certainly illegal. May be that is what SEC is after.
If the Wall Street Apple Analyst makes these comments to manipulate the AAPL stocks so that his company or his associated company tries to take advantage of the situation either to decrease or increase the value of the AAPL stocks, to gain monetary advantage is certainly illegal. May be that is what SEC is after.
If the Wall Street Apple Analyst makes these comments to manipulate the AAPL stocks so that his company or his associated company tries to take advantage of the situation either to decrease or increase the value of the AAPL stocks, to gain monetary advantage is certainly illegal. May be that is what SEC is after.
just my 2 cents.
Yes, that most certainly is one of the issues the SEC is zeroing in on with this case.
Lastly, to reiterate my point made earlier, it's generally illegal to profit from non-public news about a company (typically when that news has the potential to cause a market value change) regardless of where that information came from. It's fine to chit-chat with shopkeepers over non-public info but to attempt to make money from that is another matter.
Suppose I work for a company that supplies parts for the iPad and my wife and I have decided we're going to sell $40,000 of our Apple stock to put in a swimming pool in the backyard. Then consider the following two scenarios:
1. I go to work and find out iPad production is being significantly ramped down due to slow sales. This is "insider" information and the poor sales information, when made public, is likely to affect Apple's share price. No worries, I've already decided to sell to finance the pool, but does having that information now make my sale suspect? How do I prove intent? What if my next door neighbor is the one with the Apple stock and is putting in the pool. If I tell him, are we both now guilty of insider trading? What if it's my son and daughter-in-law?
2. I go to work and find out iPad production is being significantly ramped up due to blowout sales and possibly a next generation iPad coming out the next quarter. Again, I have "insider" information, only this time I go home and tell my wife we should wait a few months before selling and she agrees. In this case the insider information has clearly affected my sell decision, but there's no way for anyone to know. And if it's my neighbor putting in the pool and I tell him, no one can prove it in that case either.
You can construct a million scenarios like this. No one is going to care when we're talking $40,000, but if my neighbor happens to run a mutual fund, now it matters. You can't stop that kind of information flow unless you can get inside people's heads and discern intent. Contractually a worker can sign non-disclosure statements, and if the company finds he is leaking information take appropriate legal action.
The system will never be perfect. We should demand transparency at every opportunity, but if the company is secretive in the interest of increasing shareholder value, then they're doing the right thing. Being secretive is one thing, being dishonest is another.
Suppose I work for a company that supplies parts for the iPad and my wife and I have decided we're going to sell $40,000 of our Apple stock to put in a swimming pool in the backyard. Then consider the following two scenarios:
1. I go to work and find out iPad production is being significantly ramped down due to slow sales. This is "insider" information and the poor sales information, when made public, is likely to affect Apple's share price. No worries, I've already decided to sell to finance the pool, but does having that information now make my sale suspect? How do I prove intent? What if my next door neighbor is the one with the Apple stock and is putting in the pool. If I tell him, are we both now guilty of insider trading? What if it's my son and daughter-in-law?
2. I go to work and find out iPad production is being significantly ramped up due to blowout sales and possibly a next generation iPad coming out the next quarter. Again, I have "insider" information, only this time I go home and tell my wife we should wait a few months before selling and she agrees. In this case the insider information has clearly affected my sell decision, but there's no way for anyone to know. And if it's my neighbor putting in the pool and I tell him, no one can prove it in that case either.
I heard a story on this on NPR while driving home yesterday. Your scenario above sounded very much like what analysts are doing. They "befriend" the wife in the story above, or the sister of the wife or some such. Then they "hire" these people to work at shell corporations and pay them for the above sorts of insider information. They also work with ex-employees who maintain contact networks within companies and pump their old "friends" for information.
It certainly sounds a bit shady, but 'illegal'? I think there's a big grey sliding-scale here. It's one thing if you overhear something in a bar. It's another if you pay someone to hang around in said bar to eavesdrop. It's yet another if that someone starts buying drinks, hookers, & blow for people in said bar.
But should it be illegal to say, watch the parking lot of one of the suppliers to see if people are working more shifts than usual?
There's probably some clearly illegal stuff going on, but as others have said, there's also been some BIG things dropped in the SEC's lap that they ignored. Why not chase the easy stuff first?
Comments
This is the US Government's way of shake'n Apple down for some coin. Steve probably said 'no' to him when he stopped in a month back.
Now it's payback time.
Common all you greedy bastard Apple Shareholders... sho me da money...
-luv Obama xoX
Hey, it's Chicago politics at it's best.
Wow -- a truly massive reading comprehension fail.
If the employees of the firm use their knowledge of the firm to take money from the owners beyond what their employment contract specifies, that is embezzlement. For example, if a cashier takes money from the cash register based on his knowledge of how to open the cash register, that's stealing from the owners and it is rightly illegal.
If an employee of the firm knows that a new product has major production problems and uses that knowledge to short the stock, he is essentially taking money from the owners of the firm above and beyond what his employment contract calls for. It seems to me that should also be illegal.
But what if instead of shorting the stock, the employee sells the information about the production problem to someone who is representing some (but not all) of the owners of the firm? Seems to me that is what's going on here, and that it's still a problem. Go back to the cashier analogy -- what if instead of taking the money from the cash register only for himself, the cashier shared some of it (perhaps even most of it) with one of the owners of a store but not the other. So in that case, the cashier isn't purely stealing from the owners -- he's helping one owner steal from the other.
But with these analysts, at least some of them, they seem to report their information to the public. So they aren't (at least not always) reporting their information to some owners but not others. At least in those cases -- where the information is made available to everyone -- I think this could be a net positive for shareholders, since it gives them more information than they would have otherwise had.
Definitely a tricky issue, I think.
This is retarded. The SEC completely missed the sub-prime and CDS/CDO meltdowns because they didn't understand them, and this is how they're going to fix it? By punishing people for improving transparency?
I can understand how checking with suppliers would seem like unfair insight into the plans and pulse of a company, but to call it 'insider trading' is a bit much. Going by the definition mentioned in the article the only sources of information for investors are information the company itself authorizes for release and the historical data of its past performance. Investors should be allowed the ability to receive a wider, more objective picture of a entity's worth and future than just the information the entity wishes to let them know.
The company I work for encourages us to become knowledgeable around insider trading and has given us some training in that area. It's a very worthwhile exercise. What the SEC is looking at in this case certainly seems to fall within the realm of insider trading.
It's generally illegal to trade securities in a company where you've been exposed to non-public information that could effect a company's stock price, even if you didn't willingly go out and get that information yourself. Non-public sales and production data definitely can influence a stock price.
I understand a couple of the comments in the thread about Apple not being as transparent as they would wish on some of this data. However, Apple, like all companies, has to comply with all kinds of financial disclosure rules and I can't imagine they wouldn't be. If what they disclose is not sufficient in your mind then probably the best recourse is to find other companies to invest in where the level of public data is higher.
America's political priorities continue to be a farce.
The one analyst that has nothing to worry about is Gene Munster. He has been wrong so many times that he could never be accussed of having insider info.
Please remind of this crap the next time the SEC whines about not having enough staff or budget to cover the absence of oversight of crooks in the investment and banking industries.
America's political priorities continue to be a farce.
Somethings have to be done to repair the damage done by almost a decade of greed and deregulation. Not that I am saying this is it mind you. It can't all be fixed in two years, but lets not drag politics into this too far eh?
The whole stock market is stacked against the individual trader, and is rigged from top to bottom. Getting involved is a fools paradise.
For example
a) If a trading company makes a purchase, it is executed in an instant. You do it, and it take a few minutes. So you are not playing on a level field.
b) The trading companies have computer programs that do "hands off trading" to scrape off every cent they can of a short drop and rise. Its like you vers. a supercomputer.
c) The financial models that make the big money are designed by very smart guys who are overpaid for the social value they perform in our society, allowing them to leave their morals behind. And they never go to jail, you might pay a fine ( but never have to admit to wrongdoing) and just might be able to get into the big money, politics.
They tell you its a gamble to play the stock market. It is only a gamble if you are a small investor. It is a well oiled, money making, secret black box if you work for a fund. And why? There is to much money involved to leave it to chance. That would be illogical.
End of Rant.
While I agree that insider trading is an issue and stock manipulation even worst, I see it as a very sad day if one can't have a discussion with a shop keeper about business or sales. Really what is next, will they make it illegal to sit outside a store and count boxes leaving?
Ultimately stock holders need solid information about sales to value a company and understand customer acceptance of it's products. Waiting for quarterly reports leads to abuse by the management teams of public companies. Certainly there are recent example in the auto industry here and in the past in the computer industry. In fact it makes me wonder how a company can legally keep sales figures from stockholders.
Spot on.
I too have mixed feelings about this. The definition of what constitutes 'insider information' is so loose so as to give the government sweeping powers.
Moreover, it is not as though speculation on Apple stocks and guesstimates of its fundamentals is going to magically disappear if analysts stopped doing channel checks: the information quality (such as it is now) will get even worse, leading to even greater volatility for AAPL.
Meanwhile the SEC did little to stop the bubbles, Lehman, and/or Madoff despite having a report on their desks about Madoff. This is easy pickings, it is not insider trading ( by any sane definition) and these guys actually produce some service to normal traders.
Please remind of this crap the next time the SEC whines about not having enough staff or budget to cover the absence of oversight of crooks in the investment and banking industries.
America's political priorities continue to be a farce.
Yes over-regulate on minor infringements, and ignore the rest.
Paying someone for insider information is always a problem.
This is where I as a stockholder has huge problems. Sales figures really shouldn't be secrete, as investors have no ability to make informed decisions about the stock. Worst there is a history of management teams doing bad things when the data isn't that good. From the standpoint of an investor, waiting for quarterly reports is not acceptable.
I agree that you rase a very valid question.
I don't claim to understand where the line is between legal information gathering and insider trading, so I would be hard pressed to get involved in a discussion about exactly what sort of information gathering should be legal. I can see good arguments for more information being made available (who doesn't want more transparency out there) and I can see good arguments for Apple wanting to be able to keep secrets (everybody seems to be copying them all the time--shouldn't they at least have a head start?)
As to the Obama hater one could see this as another element in what is becoming a very repressive government.
This is where I believe it gets silly. Represive? Really? I suppose people see what they want to see and everyone believes what they want to believe. But if this is where you need to go to fine evidence of "repression" it seems that you are really grasping at straws!
It seems to me that "insider trading" should be viewed as a form of embezzlement. Employees of a firm work for the owners of the firm (the shareholders). The owners of the firm choose to compensate those employees in a variety of ways -- salaries, bonuses, stock options. In exchange for that compensation, the employees of the firm are supposed to do work to maximize shareholder value.
If the employees of the firm use their knowledge of the firm to take money from the owners beyond what their employment contract specifies, that is embezzlement. For example, if a cashier takes money from the cash register based on his knowledge of how to open the cash register, that's stealing from the owners and it is rightly illegal.
If an employee of the firm knows that a new product has major production problems and uses that knowledge to short the stock, he is essentially taking money from the owners of the firm above and beyond what his employment contract calls for. It seems to me that should also be illegal.
But what if instead of shorting the stock, the employee sells the information about the production problem to someone who is representing some (but not all) of the owners of the firm? Seems to me that is what's going on here, and that it's still a problem. Go back to the cashier analogy -- what if instead of taking the money from the cash register only for himself, the cashier shared some of it (perhaps even most of it) with one of the owners of a store but not the other. So in that case, the cashier isn't purely stealing from the owners -- he's helping one owner steal from the other.
But with these analysts, at least some of them, they seem to report their information to the public. So they aren't (at least not always) reporting their information to some owners but not others. At least in those cases -- where the information is made available to everyone -- I think this could be a net positive for shareholders, since it gives them more information than they would have otherwise had.
Definitely a tricky issue, I think.
Let us see:
If the Wall Street Apple Analyst makes these comments to manipulate the AAPL stocks so that his company or his associated company tries to take advantage of the situation either to decrease or increase the value of the AAPL stocks, to gain monetary advantage is certainly illegal. May be that is what SEC is after.
just my 2 cents.
Let us see:
If the Wall Street Apple Analyst makes these comments to manipulate the AAPL stocks so that his company or his associated company tries to take advantage of the situation either to decrease or increase the value of the AAPL stocks, to gain monetary advantage is certainly illegal. May be that is what SEC is after.
just my 2 cents.
Thats not what they are claiming,
Let us see:
If the Wall Street Apple Analyst makes these comments to manipulate the AAPL stocks so that his company or his associated company tries to take advantage of the situation either to decrease or increase the value of the AAPL stocks, to gain monetary advantage is certainly illegal. May be that is what SEC is after.
just my 2 cents.
Yes, that most certainly is one of the issues the SEC is zeroing in on with this case.
Lastly, to reiterate my point made earlier, it's generally illegal to profit from non-public news about a company (typically when that news has the potential to cause a market value change) regardless of where that information came from. It's fine to chit-chat with shopkeepers over non-public info but to attempt to make money from that is another matter.
The insider trading laws are absurd. They are basically banning analysis,
1. I go to work and find out iPad production is being significantly ramped down due to slow sales. This is "insider" information and the poor sales information, when made public, is likely to affect Apple's share price. No worries, I've already decided to sell to finance the pool, but does having that information now make my sale suspect? How do I prove intent? What if my next door neighbor is the one with the Apple stock and is putting in the pool. If I tell him, are we both now guilty of insider trading? What if it's my son and daughter-in-law?
2. I go to work and find out iPad production is being significantly ramped up due to blowout sales and possibly a next generation iPad coming out the next quarter. Again, I have "insider" information, only this time I go home and tell my wife we should wait a few months before selling and she agrees. In this case the insider information has clearly affected my sell decision, but there's no way for anyone to know. And if it's my neighbor putting in the pool and I tell him, no one can prove it in that case either.
You can construct a million scenarios like this. No one is going to care when we're talking $40,000, but if my neighbor happens to run a mutual fund, now it matters. You can't stop that kind of information flow unless you can get inside people's heads and discern intent. Contractually a worker can sign non-disclosure statements, and if the company finds he is leaking information take appropriate legal action.
The system will never be perfect. We should demand transparency at every opportunity, but if the company is secretive in the interest of increasing shareholder value, then they're doing the right thing. Being secretive is one thing, being dishonest is another.
Suppose I work for a company that supplies parts for the iPad and my wife and I have decided we're going to sell $40,000 of our Apple stock to put in a swimming pool in the backyard. Then consider the following two scenarios:
1. I go to work and find out iPad production is being significantly ramped down due to slow sales. This is "insider" information and the poor sales information, when made public, is likely to affect Apple's share price. No worries, I've already decided to sell to finance the pool, but does having that information now make my sale suspect? How do I prove intent? What if my next door neighbor is the one with the Apple stock and is putting in the pool. If I tell him, are we both now guilty of insider trading? What if it's my son and daughter-in-law?
2. I go to work and find out iPad production is being significantly ramped up due to blowout sales and possibly a next generation iPad coming out the next quarter. Again, I have "insider" information, only this time I go home and tell my wife we should wait a few months before selling and she agrees. In this case the insider information has clearly affected my sell decision, but there's no way for anyone to know. And if it's my neighbor putting in the pool and I tell him, no one can prove it in that case either.
I heard a story on this on NPR while driving home yesterday. Your scenario above sounded very much like what analysts are doing. They "befriend" the wife in the story above, or the sister of the wife or some such. Then they "hire" these people to work at shell corporations and pay them for the above sorts of insider information. They also work with ex-employees who maintain contact networks within companies and pump their old "friends" for information.
It certainly sounds a bit shady, but 'illegal'? I think there's a big grey sliding-scale here. It's one thing if you overhear something in a bar. It's another if you pay someone to hang around in said bar to eavesdrop. It's yet another if that someone starts buying drinks, hookers, & blow for people in said bar.
But should it be illegal to say, watch the parking lot of one of the suppliers to see if people are working more shifts than usual?
There's probably some clearly illegal stuff going on, but as others have said, there's also been some BIG things dropped in the SEC's lap that they ignored. Why not chase the easy stuff first?
- Jasen.
Somethings have to be done to repair the damage done by almost a decade of greed and deregulation.
We did. We put the deregulators in charge of the House of Representatives.
Yes over-regulate on minor infringements, and ignore the rest.
This is the SEC equivalent of the Granada invasion.