insider trading -- how common?

[Sigh RolleyEyes]

was reading this article -- http://www.theaustralian.com.au/bus...-insider-trading/story-fn4xq4zx-1225964561434

i know very little about finance/trading etc but it made me wonder how common is this type of thing?

the amount of inside information 'out there' must be massive given the number of public companies that exist? i'm guessing the amount of insider trading that exploits the inside info and that isn't caught/prosecuted must be big? also, out of interest roughly how many cases such as this would there be in Oz in a year? how do they catch people? -- does asic or someone investigate suspicious share price moves?

is anyone with knowledge of the field able to venture an educated opinion on these matters?

 

[Stocks_go_Up]

I would say it is very common. It is the nature of the beast, survival of the fittest. Basically whoever has access to the most information earliest has an advantage in the share market game. I think a very small percentage of people would get caught. I work for a company and at least 40 people - including me, get daily production figures. From these reports I can figure out very accurately profits and losses for each quarter and determine how the market will react when the results are released at the end of the quarter based on the forecast given at the start of the quarter by CEO & CFO.

I choose not to share this information with friends or use it to my benefit because I have no interest in shares or the patience to consistently work out the numbers. I'm not naive enough to think their aren't people in a similar situation to me who chose to take advantage of the information they have access to and use for personal gain - including friends or associates. That is why I am hesitant to get into the share market game, because I know there are thousands of people out there who know more than I do at an earlier time - I prefer the odds to be in my favour.

There is usually a valid reason when you see senior management dumping shares before any official press release. Go look at Enron for an extremely well documented large scale example.

 

[J_Moore]

Law academic on the radio this morning said a study he'd done in the late 90's suggested about 10% of trades involved insider information of some sort. Which is pretty high.

It's a very grey area, though.

 

[r dub 19]

Brokers do this on a regular basis.

"information is the most valuable commodity"

 

[Visions]

Very common. You can find plenty of examples in the sharemarket, where low volume traded companies have had huge volumes traded for no reason just before a positive announcement (people buying in). Word gets out to a selected few beforehand who try and get in on the action.

As for retribution, no chance in that. ASIC is a toothless wonder who don't do anything, really don't know why they exist to be honest. They get paid for doing nothing.

 

[dmc333]

Yeah plenty of companies leak like sieves.

Oh look it's a speeding ticket.

"No your honour, we know nuffing."

 

[r dub 19]

Question. Say my mate is a driller for a small exploration company and says "we found a fcuk load of copper". Based on this I go and buy shares. Is it only the driller that gets the book thrown at him or me as well.

 

[Stocks_go_Up]

Question. Say my mate is a driller for a small exploration company and says "we found a fcuk load of copper". Based on this I go and buy shares. Is it only the driller that gets the book thrown at him or me as well.

I would say both of you would be in trouble. If they could prove you knew the information was not made public. These types of situations are very common. There are so many people in the exploration game that get first access to production figures, delays, contracts etc before they go public. News spreads like wildfire in these companies.

I have to laugh when the CEO makes blatant lies to shareholders at quarterly meetings about production targets. Either I know what we do and how efficient we can do it better than him, or he doesn't have a problem telling porkies. I think the advantage lies in actually being at the site and getting first hand information - not in an office thousands of km away.

I'm not a lawyer but I would think the company had an obligation to tell shareholders when an executive takes an $800,000 bonus and jumps ship, or the fact they have over $5 million in bonuses due to employees for this quarter. They didn't mention any of it in the quarterly - not sure if they are obliged to. If I was a shareholder I would want to know this type of stuff.

 

[yeah_nah]

Question. Say my mate is a driller for a small exploration company and says "we found a fcuk load of copper". Based on this I go and buy shares. Is it only the driller that gets the book thrown at him or me as well.

IF you got caught I'd say both would be done, but how are you going to get caught.

My business organisations tutor was telling us about back in the early days of the internet there was a very popular forum where people would discuss stocks etc.
One guy bought a shit load of shares at a low price, talked it up via the forum creating heaps of alias's. Share price sky rockets and the company has absolutely no reason why, this guy sells for huge profits. Ends up getting investigated and the cops backtraced the guys mother****ing emails and turns out he done goofed and is arrested for insider trading.

In summary, if you're going to be involved in insider trading, don't do it over the internet. Meet with the people you wish to share said information with and then its virtually untraceable.

 

[Jimmy_the_Gent]

I've always assumed that a "hot share tip" is a euphemism for "insider trading" when reading newspaper articles and the fact that it's so accepted in these articles shows how common it must be.

 

[Walesy]

I though the "hot share tip" was a euphemism for a pump and dump.

 

[treefingers]

From this article - http://www.news.com.au/money/invest...ife-in-australia/story-e6frfmdr-1111115597296

"The rate of prosecutions for insider trading in Australia is low, with an average of one insider trading conviction a year for the past decade.

That's surprisingly low.

 

[Stocks_go_Up]

From this article - http://www.news.com.au/money/invest...ife-in-australia/story-e6frfmdr-1111115597296

"The rate of prosecutions for insider trading in Australia is low, with an average of one insider trading conviction a year for the past decade.

That's surprisingly low.

Good lawyerz... The fact is as the article says, it is very common and widespread. It will always exist, it is just the way the market is setup.

 

[Caesar]

IF you got caught I'd say both would be done, but how are you going to get caught.

Insider trading in microcaps is the easiest way to get caught. Anyone buying a large number of shares in a small company just before a big announcement is going to attract a lot of attention.

Big companies that trade massive volumes every day, less so.

 

[yeah_nah]

Insider trading in microcaps is the easiest way to get caught. Anyone buying a large number of shares in a small company just before a big announcement is going to attract a lot of attention.

Big companies that trade massive volumes every day, less so.

So they're suspicious about it, I still don't think its possible to prove it was insider trading unless you were an idiot about it

 

[Caesar]

So they're suspicious about it, I still don't think its possible to prove it was insider trading unless you were an idiot about it

Or they get your 'friend' to roll on you.

 

[yeah_nah]

Or they get your 'friend' to roll on you.

Not convinced it would ever happen like this... Surely the only people who go to Jail for insider trading are employees of the company they are trading in.

 

[J_Moore]

Not convinced it would ever happen like this... Surely the only people who go to Jail for insider trading are employees of the company they are trading in.

In the case in the OP, the person jailed received a reduced sentence because they will be testifying against their friend.

 

[morgoth]

Very common but it is grey and that is why people get off. You only have to look at how many stocks trade up or down just prior to an announcement and how often these pre-moves are right. Luck, skill, I think not.

I know someone who has been nailed for it, very unpleasent and without going into my views of his case, the price relative to the cost is very high. Lost his career, house etc etc.