Dumb question of the day. How is insider trading actually caught? Example: a government employee tells a friend of potential legislation. Let’s say at a lunch where no phone call etc-
How is stuff like this prevented? I know if an usual # of trades occur in say a general location/ etc, it can be looked into etc (don’t know exact details) but it seems like insider trading would be easy to occur without any negative risk for the person acting on non public knowledge. I guess I just wonder how we don’t hear more about insider trading cases bc I’m sure it’s blatantly obvious in some cases but also can be easy to miss unless very odd scenario- aka Joe x buys $100k-500k in a stock and doesn’t make trades often. Maybe his average trade is 50k or less.
Posted by WiseDan85
4 Comments
They pinky promise to not do it. It is very difficult to prove. It happens all the time.
If they see suspicious volume before an announcement it’s probably investigated. Unless you’re connected to the white house.
Sure, maybe you don’t get caught the first time, but it’s easy money so you do it again. You want more, so you expand the operation a bit and keep at it. Over time, it just keeps growing. More people involved, more chances to get caught.
https://news.bloomberglaw.com/business-and-practice/elite-m-a-lawyers-fed-massive-insider-trading-ring-us-alleges
Mostly it involves someone knowing about earnings and mergers before they are announced. With legislation it’s harder to prove because there are so many people who know about it and the process is so long.