INSIDER TRADING.....

Mary

OK, we all know that Martha Stewart was found guilty on all charges the other day. While I'm no fan of hers, I think the millions it's cost U.S. taxpayers to prosecute her is totally out of relation to the offense. No one lost their job, pension or life savings because of what she did. (why the hell hasn't Key Lay been arrested yet?) And who amongst us wouldn't act on an unsolicited tip? About a 1 1/2 years ago, when Nortel stock was at it's all time low, $0.69/share, someone told me that he knew that Nortel was getting some big contract from a company in China (I think) and that I should buy some shares now while the price was so low. Unfortunately, I didn't have any money to spare or I certainly would have done so. Nortel's stock a year and a half later is back up to over $13.00/share. My friend bought $10,000 worth of the stock @ $0.69/share...........yes I could scream.

So how is this scenario any different than what happened with Martha Stewart? If you were given an inside tip would YOU act on it?

Phantom Stranger

Emphasis mine... the speech is good reading too.
"Insider trading" is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders?officers, directors, and employees?buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC.
Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.
Examples of insider trading cases that have been brought by the SEC are cases against:
Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;
Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;
Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;
Government employees who learned of such information because of their employment by the government; and
Other persons who misappropriated, and took advantage of, confidential information from their employers.
Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.
Rule 10b5-2 clarifies how the misappropriation theory applies to certain non-business relationships. This rule provides that a person receiving confidential information under circumstances specified in the rule would owe a duty of trust or confidence and thus could be liable under the misappropriation theory.
For more information about insider trading, please read Insider Trading?A U.S. Perspective, a speech by staff of the SEC.http://www.sec.gov/answers/insider.htm

DevonMcBride

So how is this scenario any different than what happened with Martha Stewart? If you were given an inside tip would YOU act on it?

I would have to think about this one. Martha Stewart wasn't found guilty for inside trading. She was found guilty of conspiracy, two counts of making false statements and obstruction of agency proceedings.

Devon

joenobody

Mary,

If cases were prosecuted only on a cost-effective basis pr case, we'd never try anyone! The point is that it sends out a cautionary messages to others who might think of consipiring in a similar manner.

nowisee

it has been said that the powers that be always manage to find a big name, ie martha stewart, to shoot down around tax time. it is supposed to make all the little people cringe with fear, pay their taxes, toe the line, and stay on the straight and narrow.

remember leona helmsley?

donkey

The company Martha Stewart Liviing (MSO is the ticker symbol) is publicly traded on the NYSE. I think the company can be saved based on the following analysis i came up with:

Market Cap (the total number of shares multiplied by the current market price): 539 million
Total Shares Outstanding: 49.63 million shares
Total Float (Shares that are available for trading on the stock exchange): 5.40 million shares
Stock Price: $10.80
Market Price of Float: $58.6 million
MSO has Total Cash: $175 million
MSO has zero debt.

If MSO decided to take the company private again they can thus afford to do so - let's say the stock back at 13 - 15 bucks a share (offering a premium to current public shareholders) , they should be able to use the $175 million buy back the float, rebrand the company inder a different name and re-IPO it at a future date.

Flip

About a 1 1/2 years ago, when Nortel stock was at it's all time low, $0.69/share, someone told me that he knew that Nortel was getting some big contract from a company in China (I think) and that I should buy some shares now while the price was so low.

Mary, a year and a half ago when Nortel was at .69, the out come of "Shock and Awe" was the only thing on most investors minds. If you had the guts, and as crass as it sounds, you could have bought almost anything the day after Sept 11, 2001, the invasion of Afgahnistan, the second Iraq War, and today you would be sitting pretty today.

The trick is, would you have had the fortitude to sacrifice the purchase of 10000 US dollars worth of stock in virtually anything when everyone from pundits to You Know were screaming about the demise of this economic system as we know it.

At the time, that would have been a very, very difficult decision to make, but in hind sight...so obvious.