Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

The following is not meant to be legal advice.

In the 1980s, there were many reported insider trading scandals.  The admired like Michael Milken and Ivan Boesky ended up in jail or fined for misbehaviors.  The movie Wall Street popularized the greed, business acumen, and glamour of working in finance.  Books like Liars Poker gave insight into the life of those educated from Ivy League schools who only went on to become sales professionals.

Recently, the SEC has gone back to Wall Street professionals and corporate executives to enforce insider trading laws. The increase in mergers and acquisitions activity has brought enforcement against those who trade on confidential information. 

For instance, on August 3, 2007, the SEC sued a British trader who allegedly making $3 million through insider trading in options to purchase shares before a public announcement that the company would be acquired by private equity funds.

How do people get involved in insider trading?  Sometimes information gets circulated between attorneys, executives, bankers during strategy meetings.  Some of these talks get so exciting perhaps that the people involved cannot wait to tell someone.  For example, an Oakland, CA based technology company had a CFO who had a habit of telling a former in house attorney about his adventures in a PIPE deal.  The former in house attorney tried to convince the CFO to extend a consulting contract for her in order for her to extend the expiration of her options vesting.    

Another example, on May 17, 2007, the SEC sued a former Oracle Corporation vice president who allegedly obtained inside information from his wife who also worked at Oracle, traded on confidential information about a series of Oracle acquisitions.

The SEC’s main focus now is on hedge funds and Rule 10b5-1 plans. Insider trading may occur through a group of traders involving foreign corporations, relatives, or acquaintances, where trading patterns may be difficult to identify.