[quote=“msmith537, post:9, topic:515121”]
It’s an interesting theory though. In theory, we make information less perfect by restricting it. A CEO unloading a million shares in and of itself is a pretty strong bit of information.
QUOTE]
I am not a stock trader, but from what I understand (here at least) that such a “significant” trade must be announced - and justified / explained. People are then free to draw their own inferences
The way it was explained to us, the SEC flags suspiciously lucrative trades and investigates, so if you made a windfall, you might end up talking to them. I can’t say whether or not you’re liable, since I’m not a lawyer or trader. But, strictly speaking, you did profit by insider information. I would guess the limits are more practical than anything, based on what they can prove in court. If you never traded a day in your life, and then suddenly sell the house and invest it all on short-selling a single stock just before the company announced indictments against the entire board–well, I wouldn’t be optimistic if it got to court.
An interesting, as ever, post over at Overcoming Bias:
They have to be reported after the fact. Not announced beforehand. This makes a world of difference, as timeliness of information is key. Here is an excerpt from the SEC regarding trading by Corporate Officers and Directors:
*
On July 30, 2002, the Sarbanes-Oxley Act of 2002 (the “Act”)14 was enacted. Section 403(a) of the Act amends Section 16(a) to require reports of such a change in ownership or purchase or sale of a security-based swap agreement “before the end of the second business day following the day on which the subject transaction has been executed, or at such other time as the Commission shall establish, by rule, in any case in which the Commission determines that such 2-day period is not feasible.”*
Two days is an eternity if the markets.
Full link here for those needing some light bedtime reading. 
No, you are not, though if you trade enough to catch the SEC’s eye, and they find out where you got your tip, then those officers will likely lose their jobs. You have no way of knowing that something you overhear on the subway is insider information or not, you don’t know the actors relaying the information, nor do you know the accuracy of the information.
Think back to the James Spader character on Wall Street. His main problem wasn’t that he was trading on the information Charlie Sheen gave him, but that he was trading with Sheen’s and Douglas’ money, to hide the transactions. Sheen could recommend companies that he has illegal, inside information to Spader all day; Spader can assume that the information, if being passed, is legal (and that Sheen is a good broker always finding the right deal). In the movie, Spader’s other problem was that he knew Sheen was trading on inside information.
I have to agree with Trom. I don’t think insider trading would be good for liquidity. I think it would cripple equity financing. I would even be worried of diversified index funds if I thought insiders could torpedo my holdings (even worse than they have over the past few years).
This doesn’t seem too complicated to me. The market can not work efficiently if some parties of a transaction have information that the other party can not have. If sales are down, and it is only known to a handful of people, then they can sell their stock for more than if that fact was known by the buyers. It is always the case that different parties will interpret the same data and reach different conclusions, but everyone needs to have access to the same information to make the market efficient (fair).
Now there may be other ways to structure the market so that insiders could trade more easily. One example would be a disclosure statement: “I am selling because this quarter’s sales have declined 10%”. The WSJ is saying that the insider can screw over someone and then the rest of the world is free to interpret the insider’s transaction after the fact as a way to glean information.
If insider trading was legal, all non-insiders would have pretty much no incentive to trade as they would be at such a disadvantage.
No; making false statements in response to questions she was asked to which she had a legal obligation to not answer falsely.
What the questions were about is not even relevant to that.
All trading would be insider trading. How could one compete unless they could do it too.