Tuesday, December 4, 2012

Inside Tip

Justice is always condemning
Insider activity stemming
From positions of trust,
Indiscreetly discussed
By monitored phones and IM'ing.

But let me say more than is minimal,
Lest my message be seen as subliminal:
When it comes to affairs
In the trading of shares,
Information asymmetry's criminal.

On the trading floor, all electronic communications - be they phone, e-mail or IM - are recorded and retained, just in case any questions arise later on. Sometimes, though, folks can get complacent and indulge in an instant message chat much like the following:
Weishaus: we should get [RR3] to buy a f***load
Conradt: jesus don’t tell anyone else
Weishaus: like, [RR3] buy 100000 shares
Conradt we gotta keep this in the family
Weishaus: dude, no way
i don’t want to go to jail
f*** that
Conradt: jesus christ
Weishaus: martha stewart spent 5 months in the slammer
Conradt: does [a friend] know?
Weishaus: and they tried to f*** the mavericks owner
This was the dialogue between Thomas C. Conradt and David J. Weishaus, brokers at Euro Pacific Capital, after they came upon the privileged information that IBM was about to purchase SPSS, Inc. for $50 per share. Their chat was not only colorful, but actionable.

Just in case anyone infers here a subscription to the "don't-get-caught" school of insider ethics, let me say plainly: insider trading is theft. To trade on information which one's counterparty could not be expected to know is literally stealing value. Don't do it, folks.

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