# So, what if Martha Stewart snitched him out? (Insider trading question) **URL:** \ **Category:** Factual Questions\ **Created:** [August 7, 2002, 10:49pm UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862 "2002-08-07T22:49:27Z")\ **Posts on this page:** 11\ **Page:** 1
**Author:** ![Rysdad](https://avatars.discourse-cdn.com/v4/letter/r/7cd45c/32.png) [@Rysdad](https://boards.straightdope.com/u/Rysdad)\ **Post date:** [August 7, 2002, 10:49pm UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/1 "2002-08-07T22:49:27Z")
If Martha did get ahold of inside information and knew her stock was going to tank, _and_ she then went to the SEC and said, “This guy told me my stock is going to plunge, and I want to get rid of it, but I don’t want to break the law,”…what could she do? Could she make the info public herself and then immediately unload, or what? Would the SEC say, “No, you have to take a bath just like everyone else.”? Just curious. ---
**Author:** ![tcburnett](https://avatars.discourse-cdn.com/v4/letter/t/c5a1d2/32.png) [@tcburnett](https://boards.straightdope.com/u/tcburnett)\ **Post date:** [August 7, 2002, 11:00pm UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/2 "2002-08-07T23:00:11Z")
The SEC would say “No, you have to take a bath just like everyone else” because insider trading, or trading on insider information, is illegal. ---
**Author:** ![stockton](https://avatars.discourse-cdn.com/v4/letter/s/b5a626/32.png) [@stockton](https://boards.straightdope.com/u/stockton)\ **Post date:** [August 7, 2002, 11:18pm UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/3 "2002-08-07T23:18:59Z")
> [@](#): > > \*Originally posted by tcburnett \* > \*\*The SEC would say “No, you have to take a bath just like everyone else” because insider trading, or trading on insider information, is illegal. \*\* HOWEVER, I’ll bet good money that the bath she would have taken would have been accented by a hand-braided raffia shower curtain and the water was steeped in fresh hyacinth petals. There was probably a loofah involved made from a toilet-paper core and some home-grown basil lichen, with some dandy little beeswax candles glowing in the background. So it’s NOT a bath like everyone else… ---
**Author:** ![Rysdad](https://avatars.discourse-cdn.com/v4/letter/r/7cd45c/32.png) [@Rysdad](https://boards.straightdope.com/u/Rysdad)\ **Post date:** [August 7, 2002, 11:19pm UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/4 "2002-08-07T23:19:24Z")
How about if she told her broker to immediately sell after she spoke the words, “I was just told that XYZ stock is going to plummet,” on the air? Is that public enough? ---
**Author:** ![manhattan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/manhattan/32/7_2.png) [@manhattan](https://boards.straightdope.com/u/manhattan)\ **Post date:** [August 8, 2002, 12:36am UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/5 "2002-08-08T00:36:02Z")
No. Let’s assume for this example that “her stock” means stock owned by her in another corporation and not the stock of her eponymous company. If she comes into material inside information, she may not trade until that information is either not material or not inside. Information that is material rarely become immaterial, so let’s focus on the inside part. If she knows something specific, like “Amalgamated, the big defense contractor, is going to be suspended from future defense work,” it is not enough for her to make a simple announcement that she ‘heard something bad,’ even though in her case the information would probably be sufficiently disseminated to satisfy the Commission. She would have to make the _specific_ information that she knows public, and again, that information would have to be disseminated (generally, reporting in the widely-read financial press such as the Dow Jones Newswires or inclusion in a properly-referenced document with the SEC’s EDGAR system is a good guideline for “disseminated”). This is further complicated by the fact that most of the people who come into contact with material inside information also have a duty not to disclose it. So practically speaking, she’d pretty much have to take her doily-enhanced bath ---
**Author:** ![Rysdad](https://avatars.discourse-cdn.com/v4/letter/r/7cd45c/32.png) [@Rysdad](https://boards.straightdope.com/u/Rysdad)\ **Post date:** [August 8, 2002, 12:43am UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/6 "2002-08-08T00:43:43Z")
Ok…let’s say **Manny’s** scenario is what’s going to happen… Could she have her broker on “stand-by” and ready to sell the moment the DJ Newswires go to print and get out “early” before the stock has completely plunged? (Thinking further…probably not, because if she told her broker to get ready to unload her thousands of shares at a moment’s notice, what’s to keep her broker from telling someone else to unload _now_? But we know brokers don’t do that; they only say “Buy!” 🙂 ) ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [August 8, 2002, 2:11am UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/7 "2002-08-08T02:11:42Z")
> [@](#): > > \*Originally posted by Rysdad \* > Ok…let’s say **Manny’s** scenario is what’s going to happen… > > Could she have her broker on “stand-by” and ready to sell the moment the DJ Newswires go to print and get out “early” before the stock has completely plunged? > > (Thinking further…probably not, because if she told her broker to get ready to unload her thousands of shares at a moment’s notice, what’s to keep her broker from telling someone else to unload _now_? But we know brokers don’t do that; they only say “Buy!” 🙂 ) The point you are missing is that the decision to sell is still based upon insider information. Insider trading is insider trading, no matter how you slice it (including Martha Stewart Ginshu Knives). ---
**Author:** ![AskNott](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/asknott/32/5790_2.png) [@AskNott](https://boards.straightdope.com/u/AskNott)\ **Post date:** [August 9, 2002, 3:10am UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/8 "2002-08-09T03:10:21Z")
The latest rumor is that Martha Stewart is finalizing the purchase of the Chicago Reader, which owns this message board. ---
**Author:** ![jk1245](https://avatars.discourse-cdn.com/v4/letter/j/49beb7/32.png) [@jk1245](https://boards.straightdope.com/u/jk1245)\ **Post date:** [August 9, 2002, 3:54am UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/9 "2002-08-09T03:54:59Z")
Thue dumb and funny thing about Martha’a illegal stock trade (let’s call it what it is) is that she had an insignificant amount of stock in that company. She stood to lose something like $250,000. A lot of cash to you and me (well, me anyway. There may be some loaded people on this board), but chump change compared to her overall fortune. It’s like me risking jail time over $5. Granted, I doubt she’ll do any time, but her own stock took a huge hit also. She lost tens of millions in that plunge. Goes to show that great wealth does not always equal great intelligence. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [August 9, 2002, 4:14am UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/10 "2002-08-09T04:14:10Z")
> [@](#): > > \*Originally posted by jk1245 \* > It’s like me risking jail time over $5. Granted, I doubt she’ll do any time, but her own stock took a huge hit also. She lost tens of millions in that plunge. > > Goes to show that great wealth does not always equal great intelligence. More like extreme arrogance. After all, she’s no dummy in this game. Martha was a successful stockbroker in her own right and she does know her way around the business. If the SEC is successful in her prosecution, she _will_ do time. ---
**Author:** ![RealityChuck](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/realitychuck/32/195_2.png) [@RealityChuck](https://boards.straightdope.com/u/RealityChuck)\ **Post date:** [August 9, 2002, 12:43pm UTC](https://boards.straightdope.com/t/so-what-if-martha-stewart-snitched-him-out-insider-trading-question/122862/11 "2002-08-09T12:43:15Z")
> [@](#): > > \*Originally posted by Rysdad \* > \*\*Ok…let’s say **Manny’s** scenario is what’s going to happen… > > Could she have her broker on “stand-by” and ready to sell the moment the DJ Newswires go to print and get out “early” before the stock has completely plunged? > > (Thinking further…probably not, because if she told her broker to get ready to unload her thousands of shares at a moment’s notice, what’s to keep her broker from telling someone else to unload _now_? But we know brokers don’t do that; they only say “Buy!” 🙂 ) \*\* She _could_ have left a standing order to sell the stock if it his a certain price (what she claimed to do, but evidently didn’t). Anyone can ask their broker to do this – sell if it dips below $x. That sort of order is routine and would not create a problem **if** it is put into place **before** she has access to the insider information. Once she has the inside information, she’s SOL. Her best solution once she got the information is to find out the time of the annoucement and call her broker the moment it becomes public.