At First It Was A Rumour
by Neil, 20 March 2008
Somewhere in Canary Wharf a chap in a three button single breasted Boss suit whispers to a colleague, wearing a double breasted Armani suit. “I say, I was having a drink at lunch with old Pongo. He said he knows someone who works as an accountant at HBOSH who told him that HBOSH is bust.”
Armani suited chap says, “If HBOSH is bust then their shares will fall and we can sell short and clean up”.
And that is just what three button single breasted Boss suit chap and double breasted Armani chap did.
These two chaps acted on inside information to trade in shares.
Unofficial information has to start somewhere. Any information about a company that is not a public announcement has to come from people either inside the company or from their associated advisors. That makes it inside information and trading on inside information is illegal.
What is the legality of acting on information you thought was inside information but was just a load of cockamamie airy fairy fantasy? Can Armani suited chap be prosecuted for insider trading?
And what is to be done with the whole rotten edifice of parasitic financial trading?
Sure, in a capitalist system there is a place for raising funds for worthwhile, and not so worthwhile, enterprises. But most trading is just parasitic that benefits no-one bar the traders involved.
Thursday 20 March 2008 at 14:14
It’s insider trading if the person disclosing the information is senior enough to know details that, when made public, will affect the price of a publicly traded company’s shares — usually an officer of the company, and therefore under a pretty high fiduciary trust. If it’s a lower down who happens to overhear a bit of information and they pass it on, they are tipsters and the recipient a tippee. And both are subject to regulatory sanctions and penalties. The fact that they got the facts wrong and didn’t profit may not be as important as any damage that may have been sustained by the company that was the subject of the rumour.
Thursday 20 March 2008 at 15:50
I thought they were shorting, not insider trading?
Also, it’s single-buttoned this season.
Monday 24 March 2008 at 12:10
I did read a gloating article in a financial tip sheet (work purposes, you understand), that made the following gloating claim:
“Capitalism is designed to part fools from their money”
The writer was a libertarian Ron Paul fan and actually seemed proud that capitalist market systems had these little crises as he had mystical market knowledge that meant the wise investors would be saved whilst the foolish hoi polloi (small time investors and the like) would be cleaned out.