Issue #60: Am I going to jail for insider trading?

Since the '70s, the U.S. Supreme Court has produced a handful of major decisions saying that deception means different things in different scenarios, but it always involves some sort of breach of duty. This makes sense for officers and directors — they’ve got a clear duty of trust and confidence to their firm, so if they breach that by buying/selling securities themselves OR tipping off someone else who’s not entitled to that info, it’s definitely deceptive. 

But it’s tricky when it comes to regular people like me.

“It’s not merely the unfairness of holding nonpublic information and trading on that that is actually punished,” Heminway says. “If the person doesn't have a duty to someone that’s breached by doing that, then that person is not liable for insider trading violations.”

For example, say I overhear two people in an elevator gossiping about an upcoming product release. In my head, I connect it back to a particular company, and later I go make a trade relating to that information. Because I don’t owe that company a duty, and they weren’t technically disclosing the info, I'm not likely to be liable under U.S. law for insider trading violations.

However, Heminway said I probably don’t want to push it.

“One should not use nonpublic information that one comes upon in order to really avoid liability,” she adds. “If you have it and nobody else has it, you shouldn’t use it — at least without checking with a good lawyer.”

In practice, this means I shouldn’t look at information on my roommate’s computer and avoid eavesdropping on her phone conversations, because she could deem there to be a duty of trust and confidence between us. Same goes for my acquaintances, siblings and romantic partners.

“You don't want to take risks getting information from a friend that [they] may not be entitled to share with you, especially if you know they work for an investment bank or law firm or a particular company,” Heminway adds.

(but please don't tell me you scrolled past all of my hard work)

To be safe, I should avoid doing pretty much any trading based on information I don’t think is public. It’s a complex subject area, and SEC charges for insider trading may be at their lowest level since the '80s, but it’s still not something I want to mess with. 

Heminway said insider trading is an especially hot topic right now. Because everyone’s working from home, the probability of people overhearing stuff they shouldn't — and then acting upon it — has increased.

“Even short of a[n insider trading] scheme, people can get themselves into trouble in this area,” she adds.

via GIPHY

check out this crazy celebrity purchase

via Instagram

Rapper Travis Scott released a collab with an unlikely partner last week: McDonald’s. The fast food chain is now selling a “Travis Scott meal,” which includes a Quarter Pounder with cheese, medium fries with barbecue sauce and a Sprite with extra ice, for $6. That’s not even the crazy part. Not only did Scott roll up to the launch in his $1.4 million Ferrari, but he also dropped a merch line. Anyone need a $90 body pillow that looks like a chicken nugget?

five things I'm loving online right now

send me cute pictures of your pets, please

CREDIT: KRISTINA KING

Meet Lany: cute AND smart enough to accept nothing but pets and treats so as not to upset the Sefurities and Exchange Catmission.

So is the takeaway here that I should listen to MORE bros at parties? Because this one was kind of right...

See you next week.

Julia

P.S. Last issue about investing inspired some great responses! Scholar Jeanette said she invests in a total stock market fund as well as a "woke" fund FTSE social index that excludes alcohol, tobacco, fossil fuels and the like. Scholar Dave suggested that if I'm married to the idea of owning Apple shares, I should check out something like VTSAX, which includes it. Finally, Scholar Shannon reminded me to make sure I research companies' values so I don't end up supporting a mission I don't believe in.

P.P.S. What’s your McDonald’s order? Are you afraid of insider trading? Did you once hear a thing at a party? Do you love fall memes? Send comments — BUT NOT STOCK TIPS — to julia.glum@money.com or @SuperJulia.