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Former Dell Execs Involved In Massive Insider Trading Probe

Soulskill posted about 2 years ago | from the dude-you're-gettin'-a-cell dept.

Businesses 149

DMandPenfold writes "Two former Dell employees, including a former investor relations manager, were part of a $62 million record-breaking insider trading scam, involving the company's shares as well as Nvidia stock, according to the FBI. The news comes as the U.S. authorities step up their pursuit of inside traders. Two months ago, Galleon hedge fund founder Raj Rajaratnam was sentenced to 11 years in jail for his role in a scam involving AMD, IBM and 3Com stock. Yesterday, Sandeep Goyal, an employee at Dell's U.S. headquarters between 2006 and 2007 before becoming a financial analyst, was arrested. An unnamed co-conspirator in Dell's investor relations department from 2007 to 2009 is also alleged to have been part of the scam. ... Goyal allegedly made $175,000 by providing inside information about Dell to a hedge fund. He has pleaded guilty to charges of securities fraud."

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149 comments

And yet... (3, Insightful)

Cornwallis (1188489) | about 2 years ago | (#38763686)

and yet... John Corzine is still walking the streets.

Re:And yet... (3, Insightful)

NikeHerc (694644) | about 2 years ago | (#38763910)

and yet... John Corzine is still walking the streets.

So is Nancy Pelosi and a lot of other senators and congressmen. Does anyone think they should be immune from arrest due to insider trading?

Re:And yet... (4, Informative)

scottbomb (1290580) | about 2 years ago | (#38764126)

Oddly enough, insider trading is LEGAL for members of Congress. Ain't that just awesome?

Re:And yet... (0, Insightful)

Anonymous Coward | about 2 years ago | (#38764408)

Duh, they write the laws.

Re:And yet... (1)

NatasRevol (731260) | about 2 years ago | (#38764422)

Just curious, but what about former members of Congress? What if the crimes are committed while they're not in office?

Re:And yet... (4, Insightful)

alexander_686 (957440) | about 2 years ago | (#38764872)

The short answer is no.

The trick here is that a representative’s knowledge of pending legislation, regulatory actions, etc. (i.e. knowledge from his day job) is technically not insider information – which of course if big enough to drive a very large truck though.

So congressmen can still be charged with insider trading if they got their knowledge outside of their day job Congressmen have been prosecuted when outsiders have bribed them with inside information (less paper trail then giving them money) but it’s been rare.

Re:And yet... (4, Insightful)

hoggoth (414195) | about 2 years ago | (#38764626)

Mod this up. Congress doesn't even try to hide their corruption these days.

And this is how SOPA/PIPA will play out: A new version will be introduced just after the elections that includes exemptions/protection for the big players like Google and Facebook. This version will be passed no matter how much "the people" scream, as long as congressional donations aren't in jeopardy.

Re:And yet... (0)

Anonymous Coward | about 2 years ago | (#38764888)

Oddly enough, insider trading is LEGAL for members of Congress. Ain't that just awesome?

Yep! Join the 12 bankers that run the world, and you too can be immune.

Re:And yet... (2)

AngryDeuce (2205124) | about 2 years ago | (#38764182)

No, they should all be locked up in Federal "Pound Me In The Ass" Prison, but as the people that make the laws are the people that benefit from that little loophole, I suppose that will never happen...

Hell, even if by some miracle these assholes did get locked up, you know there would be pardons handed down somewhere. They take care of their own...

Re:And yet... (1)

Jawnn (445279) | about 2 years ago | (#38764340)

If anyone has anything like, you know, proof of such offenses, then no. If not, thanks for playing.

Re:And yet... (-1)

Anonymous Coward | about 2 years ago | (#38763918)

and yet... John Corzine is still walking the streets.

Yeah what a nigger!

Re:And yet... (0)

Anonymous Coward | about 2 years ago | (#38765402)

And yet...congressman and senators are allowed to make trades based on inside information legally. This happens on both side of the party lines pretty indiscriminately so don't try and point fingers at who is at fault - they all are. Of course, why would they ever decide to make it illegal for them to fill their own pockets with inside information that they throw away countless others for.

Must be fun knowing when to sell your stocks because some big federal indictments are coming up.

Re:And yet... (0)

Anonymous Coward | about 2 years ago | (#38765856)

Would all of you just shut up and let Anonymous enjoy their popcorn for a change ?

at this rate ... (3, Insightful)

peter303 (12292) | about 2 years ago | (#38763710)

They might be able to start softball team of convicted inside traders at Fed Med by the end of the decade. its something everyone knows is happening, but almost no one gets caught.

Re:at this rate ... (0)

Anonymous Coward | about 2 years ago | (#38764214)

If congress can do it why cant we?

Re:at this rate ... (3, Insightful)

Kenja (541830) | about 2 years ago | (#38764476)

For much the same reason they get free health care from the government and yet fight against the rest of us getting it.

Libertarianism and insider trading (2)

timeOday (582209) | about 2 years ago | (#38763744)

I would be curious to hear the libertarian viewpoint on whether insider trading should be a crime?

Re:Libertarianism and insider trading (0)

Anonymous Coward | about 2 years ago | (#38763776)

In a truly free market this would have been perfectly legal.

Re:Libertarianism and insider trading (4, Insightful)

turbidostato (878842) | about 2 years ago | (#38763948)

Truly free market, you say? Last I looked, one of the conditions for a "truly free market" was perfect knowledge for all the parties. Quite the opposite to "inside knowledge".

Re:Libertarianism and insider trading (0)

Anonymous Coward | about 2 years ago | (#38764230)

Creating perfect knowledge for all the parties all the time requires government force.

Re:Libertarianism and insider trading (1)

Anonymous Coward | about 2 years ago | (#38764242)

"Last I looked, one of the conditions for a "truly free market" was perfect knowledge for all the parties"

In the Ron Paul-flavor of Truly Free Market, there is simply zero regulation. There is no requirement for the market to be transparent. Insider trading would be the norm.

Re:Libertarianism and insider trading (1)

brian0918 (638904) | about 2 years ago | (#38764248)

"Freedom" is freedom from force, threat of force, or fraud, incurred by other individuals. Ignorance does not fall into one of those categories.

Re:Libertarianism and insider trading (1)

SydShamino (547793) | about 2 years ago | (#38765086)

When the product in question isn't what it is advertised to be, that's ignorance on the part of the buyer and fraud on the part of the seller.

Re:Libertarianism and insider trading (1)

brian0918 (638904) | about 2 years ago | (#38765838)

When the product in question isn't what it is advertised to be

If it can be objectively demonstrated that the advertising was knowingly done in a false way, that is fraud, and the seller would be held liable. This is an aspect of a free society.

that's ignorance on the part of the buyer

It is not simple ignorance, which is lacking information, but actual misinformation. If a company lied about their performance to their stockholders, so that the execs could dump their stock, that is misinformation and fraud.

Re:Libertarianism and insider trading (1)

plopez (54068) | about 2 years ago | (#38766088)

Too bad the Supremes have been stripping away the rights of people to sue and get just compensation.

It's Fraud (1)

alexander_686 (957440) | about 2 years ago | (#38765158)

Follow the logic
I own company X (shareholder)
I hire a agent in a posistion of trust (a C.E.O., for example)
The manager takes / gives away valuable property (i.e. insider information)
At a disadvantage (i.e. lacking insider information) I trade at a disadvantage. (I sell stock too low, I fail to invest, etc.)
Wealth is transferred from me to the insider.

It’s a breach of fiduciary reasonability. Liberations believe in playing hardball, but cheating is another thing.

Re:It's Fraud (1)

brian0918 (638904) | about 2 years ago | (#38765910)

Follow the logic I own company X (shareholder) I hire a agent in a posistion of trust (a C.E.O., for example) The manager takes / gives away valuable property (i.e. insider information) At a disadvantage (i.e. lacking insider information) I trade at a disadvantage. (I sell stock too low, I fail to invest, etc.) Wealth is transferred from me to the insider.

Where is the lie, deception, or contract violation that would render this scenario equivalent to fraud? Simply selling when you know there is a problem with a company does not involve any lie, deceit, or fraud. If the CEO told stockholders that the company was fine, in order to buy himself time to dump the stock, then that lie would be fraudulent.

Re:Libertarianism and insider trading (1)

K. S. Kyosuke (729550) | about 2 years ago | (#38764334)

Truly free market, you say? Last I looked, one of the conditions for a "truly free market" was perfect knowledge for all the parties. Quite the opposite to "inside knowledge".

Perhaps there would be no "inside knowledge" as such, and "insider trading" would be simply "trading by insiders" and not "trading using insider-only information". But forcing companies to allow public visitors at management sessions could prove tricky...

Re:Libertarianism and insider trading (1)

ftobin (48814) | about 2 years ago | (#38765858)

To be fair, it's not a "truly free market" that requires perfect knowledge, but closer to an efficient market requirement (strict form).

I've been cultivating the idea that it's not "free markets" that we need now as much as "competitive markets". Free markets seem good for personal freedom, and can lead to competitive markets. Competitive markets, on the other hand, are what drive an economy to grow. In the US, we seem to have a good amount of "free markets", and need to focus more on the "competitive" aspects.

In terms of what's best for an individual country, we want to pursue institutions that that strengthen "free" or "competitive". Arguments that are against regulations because they are "anti-free" need to also take into account the competition-advocating parts.

Re:Libertarianism and insider trading (1)

Stiletto (12066) | about 2 years ago | (#38764594)

Apply some logic:

1. Insider trading is profitable because it capitalizes on the information disparity between public knowledge and insider knowledge.
2. There is a profit motive to seek insider knowledge.
3. If insider trading were legal, long-term outcome would be that every trader would seek (and receive) insider knowledge.
4. When every trader has insider knowledge, there is no longer information disparity, and insider trading is no longer profitable.

Re:Libertarianism and insider trading (0)

Hognoxious (631665) | about 2 years ago | (#38765046)

Correction for item 3:

If insider trading were legal, long-term outcome would be that every trader who is [screwing|related to|a former classmate of] the CxO will have insider knowledge.

Still, libertarians, due them being just so much, well, better than everyone else, will all be part of the new aristocracy when the pesky gubmint's out of the way. No problem then.

Re:Libertarianism and insider trading (0)

Anonymous Coward | about 2 years ago | (#38765442)

Your ignorance abounds. Libertarians aren't for "no government", they're for "limited government". Don't confuse them with anarchists.

Re:Libertarianism and insider trading (2)

SydShamino (547793) | about 2 years ago | (#38765216)

3. If insider trading were legal, long-term outcome would be that every trader would seek (and receive) insider knowledge.

I sense a gaping hole in your logic. What incentive would there be for those with insider information to provide it to those who lack it, other than monetary incentive. Making insider trading non-profitable by making the selling of insider secrets more profitable seems like a hollow victory.

Re:Libertarianism and insider trading (1)

Rude Turnip (49495) | about 2 years ago | (#38765220)

Back in the real world, everything you described has already happened and it's why we have the current regulations on insider trading in place. All of the knowledge you require does not get dispersed evenly to everyone. Technically, there will always be people with inside information. Therefore, you establish windows of opportunity for insiders to make their trades. Furthermore, companies are held to a strict set to guidelines to make sure they can disperse information to the public as soon as reasonably possible.

Free market! (5, Funny)

Anonymous Coward | about 2 years ago | (#38763818)

I would be curious to hear the libertarian viewpoint on whether insider trading should be a crime?

A truly free market would solve it!

How?

I SAID A TRULY FREE MARKET WOULD SOLVE IT!

Re:Free market! (3, Informative)

Tsingi (870990) | about 2 years ago | (#38764000)

I would be curious to hear the libertarian viewpoint on whether insider trading should be a crime?

A truly free market would solve it!

How?

I SAID A TRULY FREE MARKET WOULD SOLVE IT!

Yes, you did say that. In fact, you can sell parts of your company to anyone you want, barring monopolistic actions. Until you make a public offering. That would be the stock market. Ownership is now public, so you are responsible to the public and private trading most certainly should be fraud.

Re:Free market! (1)

brian0918 (638904) | about 2 years ago | (#38764640)

How?

Because IT is not a problem.

Re:Free market! (2)

istartedi (132515) | about 2 years ago | (#38765160)

For those who don't understand the free market concept, let me clue you in. It solves problems because it's an ideal. How do you obtain an ideal economic order, you say? Just send me $588,987 and I'll tell you. You must agreee not to share the plans with others. Those are my terms. I can set them, because it's a free market.

Re:Free market! (1)

Maxwell'sSilverLART (596756) | about 2 years ago | (#38765622)

For those who don't understand the free market concept, let me clue you in. It solves problems because it's an ideal. How do you obtain an ideal economic order, you say? Just send me $588,987 and I'll tell you. You must agreee not to share the plans with others. Those are my terms. I can set them, because it's a free market.

And I can refuse to buy, because it's a free market.

Re:Free market! (1)

brian0918 (638904) | about 2 years ago | (#38765644)

It solves problems because it's an ideal.

What you don't understand is that an "ideal" is not something that one either must achieve perfectly or not bother doing. An ideal is something that must be continually strived to uphold, by all members. The extent to which people do not strive for that ideal, they will see the negative consequences of their actions. I could write a perfect free market constitution in 10 minutes, but if people do not actually try to uphold that constitution, the results will not be a free market. The purpose of discussions like this is precisely to get people to strive for that ideal - the more who do, the better the results.

Re:Free market! (1)

Hillgiant (916436) | about 2 years ago | (#38765134)

I SAID A MAGICAL PRINCESS RIDING A PINK UNICORN WILL SOLVE IT!

I, for one, grow weary of this mythical "truly free market". Rather I would like some practical solutions for the problem at hand.

Re:Free market! (1)

plopez (54068) | about 2 years ago | (#38766162)

There is some debate among Economists whether such a beast can ever truly exist. See Wikipedia for a brief intro.

Re:Libertarianism and insider trading (3, Interesting)

Scareduck (177470) | about 2 years ago | (#38763868)

It doesn't strike me as being an easy thing, either way; on the one hand, it's a kind of fraud, which is one of the legitimate reasons for having a government (institutionalized and monopolized force). On the other, information is always diffused and imperfect in any market, so arresting and incarcerating people for not providing it is not likely to work well if only for political reasons (Google Harry Markopolos for an example of why). In that sense, the SEC gives people a false sense of security that the government is doing some aspect of due diligence for them that is not in reality happening.

Re:Libertarianism and insider trading (1)

JesseMcDonald (536341) | about 2 years ago | (#38765980)

Insider trading, to the extent that there is anything wrong with it, is a fairly straightforward violation of the trusted agent/principal relationship. The shareholders of a company (the principals) hire agents (the managers / high-level employees) to represent their interests; the agents then take advantage of information and influence they receive in the course of that relationship to benefit themselves, either by trading on that information, by selling it to third parties, or by diverting supplier contracts and the like, at the expense of their principals. By doing so they are committing fraud against the shareholders (who hired them on the understanding that their interests would be represented), and perhaps violating their employment contracts as well.

There is nothing inherently wrong with possessing private information, or trading based on it. As you said, information is always somewhat imperfect, so most trades involve some amount of information private to one party or the other. The problem is when you obtained private information as part of a relationship based on trust, and then violate that trust by using the information in a way that compromises the other party.

Re:Libertarianism and insider trading (1)

Bodhammer (559311) | about 2 years ago | (#38763956)

Are you talking about private folks or when US Congressmen and Senators do it by steering legislation to benefit themselves and their lobbyists with knowledge the could never be known by the public and which may be against their sworn oaths to uphold the Constitution?

I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.

Re:Libertarianism and insider trading (1)

Korin43 (881732) | about 2 years ago | (#38764074)

I think most (all?) libertarians support some sort of enforcement of contracts. So, one option is for stock exchanges to require all traders to sign some sort of contract stating that they won't engage in insider trading, and if they do, they're subject to some kind of sanction (fines/jail time).

Only an idiot would trade at a stock exchange that didn't require this kind of contract. Sadly, there's enough idiots that it probably wouldn't work.

Re:Libertarianism and insider trading (3, Insightful)

chrb (1083577) | about 2 years ago | (#38764086)

My understanding is that the majority of libertarians would say: no, insider trading should not be a crime, as it does not involve the use of force. Government should exist to protect citizens from being deprived of life and property by force, and therefore the criminal statutes should reflect that. At worst insider trading would be a contractual violation, and hence subject to a civil court case. And if you have not signed a contract prohibiting insider trading, then an insider would have freedom to act as they wish. Some would go further and argue that insider trading is actually a good thing, as it lets outsiders gain some insight as to what is actually going on inside a company, ie. in itself, insider trading it is a form of information sharing that communicates useful information to people outwith the company.

Re:Libertarianism and insider trading (1)

Rude Turnip (49495) | about 2 years ago | (#38765132)

Insider trading is fraud; you're using information that others don't have to negotiate a trade. It's no different than lying by withholding information, which most people learn by the time they're 12 years old.

Re:Libertarianism and insider trading (1)

Fnkmaster (89084) | about 2 years ago | (#38765438)

If the equities market worked the way you propose, it would be essentially lawless and there would be no participation by the majority of the public. This would then be effectively equivalent to the situation in China currently. The vast majority there invest their savings in real assets because there is no presumption of honesty or equality in public markets.

Whether you think this is good or bad, you have to realize this makes it much harder for companies to obtain equity financing from the free markets you are espousing the good of in the first place. In fact, in China, companies instead tend to obtain the vast majority of their financing from banks and government backed institutions, and those capital allocation decisions are more about job creation and political favor than about safety or efficiency of capital utilization or profit maximization.

So, in short, any libertarian who says insider trading should not be a crime is essentially supporting a Chinese-style equity market with rampant corruption and insider trading and completely dysfunctional equity markets. I assume that most libertarians would not find that to be ideal, thus they should probably reconsider their view on the topic.

Gilded Age, not Modern China (2)

alexander_686 (957440) | about 2 years ago | (#38765752)

I think you go too far when you go into China territory.

I think it would be more fair to compare it to the Gilded Age of Robber Barons. Insiders who tilted the rules of the market in their own favor. Jay Gould and Daniel Drew would be good examples. These people gained control of corporations and tilted it towards their own gain vs. the shareholders. Took control of banks and choked off competition. Etc.

Re:Libertarianism and insider trading (4, Insightful)

Kenja (541830) | about 2 years ago | (#38764206)

A better question would be, if corporations are people, wouldn't buying stocks violate the 13th amendment abolishing slavery?

Re:Libertarianism and insider trading (0)

Anonymous Coward | about 2 years ago | (#38764240)

I think trading should be a crime so yeah

No it shouldn't (0)

Anonymous Coward | about 2 years ago | (#38764518)

There is nothing inherently wrong or immoral about a company insider acting on inside information -- and there certainly isn't any presence of coercion (which there certainly is when it is criminalized). Human nature didn't criminalize insider trading; the people who control government criminalized it (note that's NOT you and me). Realize that we're not talking about organized manipulation of stock prices or executive-level scams. We're talking about a CEO's friend buying shares because he was tipped off about the big surprise coming up. But these actions don't occur in a vacuum. They contribute to the pricing of the stock, and traders will notice. They will act on the information, and others will notice. What happens today is a mass panic where the majority loses, and a small minority profit. Insider trading would help to buffer the chain of events.

In a free market, insider trading would amount to nothing more (or less) than clues to non-insiders of an upcoming directional change. And that's how it should be.

With that said, the true reason insider trading is criminalized is the same as nearly all of the other (thousands of) expansions of government over the past century: to increase the scope of their powers, justify revenue, and generally make the business of government -- notice I said "business" -- bigger and more lucrative for those who engage in REAL insider trading.

Re:No it shouldn't (0)

Anonymous Coward | about 2 years ago | (#38765580)

That's the most ridiculous thing I've heard all week. Sure it's seems just great, IF you're one of the insiders. Otherwise, you're getting screwed for the benefit of the insiders. It's akin to the BS that was trickle-down economics: "You give us everything, and maybe, if you're good, you'll get a small slice of the pie. Maybe."

Re:Libertarianism and insider trading (0)

Anonymous Coward | about 2 years ago | (#38766020)

I would be curious to hear the libertarian viewpoint on whether insider trading should be a crime?

John Stossel did a show about insider trading

More Internet related crime (-1)

Anonymous Coward | about 2 years ago | (#38763774)

Folks, I'm no fan of PIPA or SOPA, but we've got to crack down on piracy. Many criminals involved in piracy are also involved in child pornography and pedophilia. Stop piracy and protect our children.

The time to act is now

Support a revised SOPA with changes to DNSSEC impact

Re:More Internet related crime (4, Funny)

Tsingi (870990) | about 2 years ago | (#38763866)

Folks...

You can't refer to the regular posters as "folks", post AC, whip out a scare tactic, and support censorship all in the same breath.

(Actually you CAN, but expect it to be pointed out.)

Did pay off the right people? (5, Interesting)

Manip (656104) | about 2 years ago | (#38763856)

Insider trading is hugely common in the corporate world to the point that there is an entire industry surrounding it (Wall Street). Any prosecutions for "insider trading" are totally political. They either upset someone in power, upset a competitor with powerful friends, or didn't do something they were asked to do.

See Quest's CEO as an example. He refused to allow the NSA to spy on Quest's customers and suddenly he is in jail for "insider trading." Opps.

Re:Did pay off the right people? (0)

Scareduck (177470) | about 2 years ago | (#38763888)

Any prosecutions for "insider trading" are totally political. They either upset someone in power, upset a competitor with powerful friends, or didn't do something they were asked to do.

THIS.

Re:Did pay off the right people? (-1)

Anonymous Coward | about 2 years ago | (#38764736)

Remember, kids, Insider Trading is bad. Unless you are a politician, or friends with a politician, or gave money to a politician and then stayed on his good side...

It's nice to see some action... (2)

msobkow (48369) | about 2 years ago | (#38763880)

It's nice to see some action on insider trading scams and valuation fraud, but how about nailing the big fish instead of tossing us minnows and thinking we'll be satisfied. I want to see the sharks hanging on a hook: the Wall Street traders and bankers who've cost the US and global economy literal BILLIONS.

Meh (0)

Anonymous Coward | about 2 years ago | (#38763912)

Rich peoples crime. Nothing will happen to them.

Probation, suspended sentence.

Re:Meh (2, Interesting)

pwizard2 (920421) | about 2 years ago | (#38764404)

I've grown absolutely disgusted with big business AND the government. These executives are already rich from their salaries/company perks, so why even do something like this in the first place? They don't need the money... what can they buy with it that they already can't afford? I don't understand...is it just a penis-measuring game where executives are looking to make more money than the rest? Libertarianism once appealed to me, but I've seen more and more that people can't be trusted to do the right thing. The existence of a true free market depends on the major players not being a bunch of sociopaths. Giving more power to the government isn't the answer either because their agenda doesn't usually match up with mine. It's a problem with no solution.

Meanwhile, lots of ordinary people can barely afford to get by these days. If I were in charge of a company and earning several million a year, I would sacrifice my personal income for the year and give it to the people working for me instead. They need it more. If you need millions rolling in each year to maintain your lifestyle, you're doing something wrong.

Re:Meh (1)

GameboyRMH (1153867) | about 2 years ago | (#38764712)

They don't need the money... what can they buy with it that they already can't afford?

Small private jets run 20-100M, airliner-size ones can run up to 0.5B.

Insider.. it's all insider.. (5, Insightful)

iONiUM (530420) | about 2 years ago | (#38763940)

Yesterday Google announced earnings. At 4:01pm EST, exactly. I was able to get the page at 4:01:05pm EST, and just as a joke at the exact same time I checked out after hours trading on GOOG. It was already down 8%, though 5 minutes earlier it was holding around even on close. Tell me, how anyone was able to parse that document in 4 seconds, place the trade, and have it go through after hours.

The system is already so corrupt and broken that anybody who isn't on the "in" shouldn't ever try to invest except for extreme long term. I don't know why a case like this would surprise anyone.

Re:Insider.. it's all insider.. (4, Interesting)

nanoflower (1077145) | about 2 years ago | (#38764112)

It's possible due to automated trading. If Google reported that their earnings were lower than expected even if only a small amount that could lead to some automated selling. That wouldn't require an analyst to read the report and decipher it before making a decision to sell/buy/hold.

Re:Insider.. it's all insider.. (2)

TheLink (130905) | about 2 years ago | (#38764342)

What if you wrote reports/articles in such a way that the automated stuff would screw up when parsing it? :)

Of course you'd need to have some plausible deniability.

Re:Insider.. it's all insider.. (1)

Slutticus (1237534) | about 2 years ago | (#38764546)

Still insider. Only someone with access to an ECN terminal could do this that quickly. Us regular people never have the opportunity.

Re:Insider.. it's all insider.. (1)

GameboyRMH (1153867) | about 2 years ago | (#38764758)

Exactly, I'm surprised the change was so little. I bet quite a few waves of buying and selling went on before the GP saw the price.

Re:Insider.. it's all insider.. (1)

NatasRevol (731260) | about 2 years ago | (#38765554)

I have an uncle (in-law) who does exactly this. But does it for gov't stuff. Automated parsing of press release, trades based on those parsings. Tune for next release.

Re:Insider.. it's all insider.. (1)

Sponge Bath (413667) | about 2 years ago | (#38764148)

I've assumed for a long time that large shifts in stock valuations that don't appear to have a trigger are just insiders reacting to documents that will become public at a later date. By that time, all the information is already reflected in the price which stays relatively static on the "official" announcement. It's just the way the system works.

Some of that. (0)

Anonymous Coward | about 2 years ago | (#38764318)

Annoucement of lower earning, let's say and it triggers selling - regardless of what's really behind the numbers. Then when the "street" digests the numbers, things move to where they should be.

Just happened today with GE. GE said they had lower earnings and lower revenues - GE stock got killed in early trading. Then folks got the whole picture and the stock has since rebounded - I'll spare you the details.

But by all means, I'm sure there might have been "hints" during a golf game, at the gentlemen's club, that things are going to be a bit better than predicted.

Re:Insider.. it's all insider.. (2)

tlhIngan (30335) | about 2 years ago | (#38764434)

Tell me, how anyone was able to parse that document in 4 seconds, place the trade, and have it go through after hours.

You do realize that automated trading platforms do lexical analysis, right? They get a copy of all press releases and electronically decide if it's good or bad and do trades based on it. Even basic lexical analysis can tell you a statement of "loss" or "failed to meet expectations" is generally bad news (SELL!), while "higher than expected revenue" and "largest profit" is good news (BUY!).

In fact, it's possible all statements about earnings and such are couched in rather standard language to comply with regulations - trying to weasel word your way out of saying loss could be seen as trying to decieve the public.

Re:Insider.. it's all insider.. (1)

quarterbuck (1268694) | about 2 years ago | (#38764810)

Many automatic trading platforms support it.
For example, you already know analyst/market estimates for revenues and profits. All of the markets know it, so it is priced in. If the actual numbers are higher, it is a surprise and the stock will go up. Else it will go down. So you just build in a news parser - Reuters/Bloomberg etc. can provide you the news in many formats. SEC also has reports in xml. So parsing it is trivial. After that it is just a matter of feeding it into your trading platform, which is also simple enough.
I have actually seen ads on the NY Subways which tout a news vendor reporting a specific news one second before the other (I think in this case it was Reuters/Bloomberg) - so I have to think this sort of trading is already standardized and common.

I'm not surprised (0)

Anonymous Coward | about 2 years ago | (#38763972)

Everything about Dell is a scam these days!

So why haven't the feds shut down the company? (0, Redundant)

tekrat (242117) | about 2 years ago | (#38764102)

OK, lemme get this straight... At Megaupload.com, some people do something illegal on the site, and the entire company is shut down, kaput, without even a trial.

Now here's a story about insider trading, which I assume is also something illegal... Why isn't the company they worked for ALSO shut down?

It seems to me that we have two standards of 'justice' in this country. And if you're a rich white guy, that system is a lot more lenient.

Re:So why haven't the feds shut down the company? (1)

Samantha Wright (1324923) | about 2 years ago | (#38764406)

Nah, Kim Dotcom was a rich white guy too. He just wasn't as good at getting in people's pockets. I mean, pfft, he spent $500,000 on a fireworks display in New Zealand, but that's not nearly enough to make them "lose" his extradition papers.

Re:So why haven't the feds shut down the company? (1)

OhPlz (168413) | about 2 years ago | (#38764566)

Why isn't the company they worked for ALSO shut down?

I remember sitting in class in elementary school when the teacher would hold the whole class responsible for something that one individual did. That sucked then, and it would still suck now.

How dare they make information public too soon! (0)

brian0918 (638904) | about 2 years ago | (#38764218)

Contrary to the labeling of this as a "scam" worthy of more years in prison than many murderers gets, insider trading is actually a good thing for the market. Information about the quality of a company helps provide the market with knowledge and certainty about future prospects. A company may not want to have negative information released too soon, however if market insiders are able to sell their stock ASAP, they signal to the market that there are problems with the company, allowing the market to respond and adjust accordingly. By banning insider trading (except, of course, among politicians), the government is not only propping up failing organizations, but also hindering successful ones, and adding uncertainty to the market.

Re:How dare they make information public too soon! (1)

stewbee (1019450) | about 2 years ago | (#38764616)

Um, what? The people that get to sell first will not be impacted by the mass sell off of the others. The insider trading restriction allows for all parties to have the opportunity to sell when the news is released. Insider trading is almost the opposite of a free market. In a free market, all parties make decisions based on all information available and is assumed to be perfect. If there are a select few that have more information than others, then this violates this assumption.

Re:How dare they make information public too soon! (0)

brian0918 (638904) | about 2 years ago | (#38764798)

Um, what? The people that get to sell first will not be impacted by the mass sell off of the others.

Why should they be? What is the problem exactly?

The insider trading restriction allows for all parties to have the opportunity to sell when the news is released.

No, it doesn't. It allows for people who have political pull to sell before the public has knowledge. All politicians, for example, are exempt from insider trading laws, and can make fortunes [wsj.com] by dumping/buying stocks before passing new selective legislation.

In a free market, all parties make decisions based on all information available and is assumed to be perfect.

A free market protects individual rights to life, liberty, property, and the pursuit of happiness, against force, threat of force, and fraud, and provides judicial recourse when such rights are violated. There is no right to perfect, equally-available knowledge.

Re:How dare they make information public too soon! (3, Interesting)

stewbee (1019450) | about 2 years ago | (#38765068)

Step away from the libertarian kool-aid for a minute and think about it rationally. Here is an excerpt from wikipedia about information asymmetry which is what occurs when there is insider trading.

In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection,[1] moral hazard, and information monopoly.[2] Most commonly, information asymmetries are studied in the context of principalâ"agent problems.

This affects things such as rational pricing of goods, as well as supply and demand. Insider trading is also a momentary arbitrage. While there is nothing inherently wrong with arbitrage, those privy to the information are those that get to take advantage of it while the non-informed parties will suffer. This is not conducive to a true free market.

Re:How dare they make information public too soon! (1)

brian0918 (638904) | about 2 years ago | (#38765534)

While there is nothing inherently wrong with arbitrage, those privy to the information are those that get to take advantage of it while the non-informed parties will suffer. This is not conducive to a true free market.

You are simply reasserting what I have already stated is not the case. The "free" in free market refers to the freedom individuals have from force, threat of force, or fraud, and the judicial recourse they have when such rights violations do occur. There is no freedom from ignorance, nor a right to perfect, equally-accessible knowledge.

State, precisely, what the crime is committed when someone who is more well-informed sells sooner than someone who is less well-informed. What rights are violated by such an action?

That Wikipedia article lists a variety of models which conclude that markets can fail, and then pretends that market members are incapable of reading and learning from such models, and adjusting their actions accordingly. Why wouldn't market participants adjust to this new knowledge about how the market supposedly works, in order to avoid the various negative effects that the models predict will happen? Is it that market members are simply stupid and short-sighted, and need to be regulated? Is it that the models aren't actually representative of market function? Or something else?

Re:How dare they make information public too soon! (1)

stewbee (1019450) | about 2 years ago | (#38765956)

Then let me put it into terms that you might more easily understand. It would result in theft of the other non informed players in the game because of the existing arbitrage. This is why insider trading rules exist. You really do see this, right?

I see what you mean about any regulation as being non-free market, but you are taking it to an irrational extreme. You really don't make it sound rational when you equate regulation or government interference as theft. The logical conclusion of a system which allows insider trading would be that others are discourage from investing. Why would I put my money in company X if I know that the people inside of said company are just going to fleece me through less than dubious means by using, for example, insider trading? Look past your dogma for a minute. Sheesh.

Re:How dare they make information public too soon! (0)

Anonymous Coward | about 2 years ago | (#38764700)

Your pretty good at that there spin. Consider, that stock prices are based on demand, not the value of the company. If an insider sales, its because they know the information is going public. If there was going to be a cover up, the insiders wouldn't sell. So I don't see how this brings any value to the market. Instead, it gives certain investors an unfair advantage.

Re:How dare they make information public too soon! (1)

brian0918 (638904) | about 2 years ago | (#38765296)

Consider, that stock prices are based on demand, not the value of the company.

Isn't demand based on the value of the company? If not, what is demand based on? What is your evidence that a person's willingness to pay a certain price for a stock is not related to the value that person sees in the company....?

All insiders? Or just the one who want to prop up the company? Information has a way of leaking out one way or another, and only laws against insider trading can interfere with such a leak.

Re:How dare they make information public too soon! (1)

brian0918 (638904) | about 2 years ago | (#38765314)

Messed up on the second quote. Here it is, fixed:

If there was going to be a cover up, the insiders wouldn't sell.

All insiders? Or just the one who want to prop up the company? Information has a way of leaking out one way or another, and only laws against insider trading can interfere with such a leak.

Troll? Really? (1)

brian0918 (638904) | about 2 years ago | (#38765948)

I always find it odd that an industry which experiences the least amount of government regulations (tech and Silicon Valley), and flourishes as a result, is so adamant about regulating industry.

offshore (0)

Anonymous Coward | about 2 years ago | (#38764374)

A lot of Indian names in the news post

Re:offshore (1)

PlatyPaul (690601) | about 2 years ago | (#38765040)

To be pedantic: Raj Rajaratnam is a US Citizen, residing and (formerly) working in the US, born in Sri Lanka.

Indians... (0)

Anonymous Coward | about 2 years ago | (#38765302)

... now there's a surprise...

After all, India is such a wonderful place, just look at this:

http://www.chinasmack.com/2010/pictures/filthy-india-photos-chinese-netizen-reactions.html

Don't tell me, "racist" "racist" "racist"... Yep, that should make it all magically go away.

$68 Million = Go To Jail, Crash World Economy... (0)

Anonymous Coward | about 2 years ago | (#38765694)

Get bonuses and a bailout from government. Too big to prosecute?

I'm shocked! Shocked! (1)

gestalt_n_pepper (991155) | about 2 years ago | (#38766018)

To see insider trading going on at a respectable company like Dell of all places. I mean, look at the quality of their products and their stellar technical support (cough, cough).

Excuse me, I must mop up that sarcasm that's been dripping on the floor.

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