I’m not sure if there’s really a factual answer to this.
We all know that the SEC prohibits insider trading of stocks. But what if a company insider had been planning to do something with his stock, and then finds out he can’t, because of trading rules?
Example:
Suppose that you have serious cash flow problems, for some reason, and you have borrowed money against your company stock, and the bank is now demanding payment. For whatever reason, you have no other available collateral for another loan, and no cash. The only way to repay the loan is to sell your stock. What do you do if you’re in a no-trading window that did not exist when you took out the loan?
Can a bank repossess stock in the same manner as a car? If so, are you still liable to the SEC?
If an insider was already planning to do something with his stock (sell it, I assume in this case), he can file the paperwork stating that he plans to sell X shares on Y date. As long as he’s filed that paperwork (which, I think would be public information), it doesn’t matter what happens. The day before his sell order executes he could find out that the company is about to go bankrupt and he’s going to get out just in time. Or, the they’re going to be bought up and the price is going to triple the day he sells.
You can look online and see what the insiders are doing.
IANAL, but from this webpage for the Financial Industry Regulatory Authority, Inc., “When you pledge your securities as collateral, you generally transfer the stock to the lender, who then has total control over it.”
It seems that when you pledge the stock as collateral, you lose control over it and presumably the no-trading window doesn’t apply to the lender.
Are you saying the standard way of selling stock involves filing paperwork documenting your intention days before the sale? Isn’t that a little tough on the day traders?
Day traders are presumably not insiders, so they aren’t regulated in the way they buy or sell stock.
If you are an insider, having a publicly available plan to sell stock at a given time, planned well in advance, can help you avoid accusations of insider trading. See Rule 10b5-1. I don’t know if “a few days in advance” would help much for those purposes though.
IANAL and IANSEC/FINRA/any other regulator, however I am a Certified Fraud Examiner and do a lot of consulting work with banks and financial service companies around fraud, legislation and risk,
The situation you describe is textbook conflict of interest. IOW, “I sold my stock during the no trading window because I’m in massive debt” is the exactly sort of red flag regulators and compliance folks would be looking for. Morgan Stanley (your employer) doesn’t care that you owe money to Bank of America (your personal bank).
AFAIK, they don’t “repossess” stocks. They will just fine you or send you to jail.
“Insiders” are typically officers at the company or senior execs. If they are senior enough, there are various filings they have to report before they can sell their shares . However, the rank and file of certain companies may also be under certain rules. For example, my wife works for a rating agency. There are certain stocks we aren’t allowed to own and we are obligated to declare the ones we do own. Same thing when I worked as a consultant with the Big-4. Typically I couldn’t own stocks of firms we audited (it’s actually a bit more complex and dependent on level, but you get the idea).
Traders and stockbrokers typically aren’t trading their own companies stocks. Also. it’s a bit harder to prove what a trader did or did not hear about a pending merger from his college buddy over at Goldman Sachs. But I’m sure companies have various controls in place to try and detect these things.
No, just insiders and/or people that hold more than 10% of the company, IIRC.
Looks like you actually have a few days after a buy or sell to file the paperwork, but you do still have to let the public know about it.
Like I said earlier, it’s online and not hard to find. My broker lists it all right there with everything else about the company.