Shorting Spitzer's Victims

October 22, 2004 4:33 PM

Would it be legal for a member of the NYAG's office to start shorting a company Spitzer's about to sue shortly before he makes his first press release about it, given that my impression from this article is that his doing so tends to lead to drops in stock prices?
posted by kenko to work & money (6 comments total)

It would probably be insider trading, so it would be illegal in the criminal sense.

Also not something the Bar Association would take kindly to, and could lead to them being unable to practice law.
posted by falconred at 5:04 PM on October 22, 2004

Considering that one of Spitzer's actions related to front running, a staffer found shorting stocks in advance of a Spitzer press release should expect to lose their job.
posted by b1tr0t at 5:27 PM on October 22, 2004

Ok. I guess it makes sense that it would be considered insider trading; I thought that you had to work at the company being traded for it to be insider, but that wasn't actually based on any knowledge (hence the question).

And I wouldn't expect the Bar or Spitzer to be happy with it—I just didn't know if it would be strictly legal.
posted by kenko at 5:40 PM on October 22, 2004

Insider trading is making a trade with knowledge that only insiders would have, without making the proper SEC disclosures.

Insider trading is limited to the stock markets. As far as I know, only ethics stop you from trading currencies or bonds based on "inside" information.

Note that Martha Stewart was not an employee of ImClone.
posted by b1tr0t at 5:53 PM on October 22, 2004

IANAL.

No.
posted by mkultra at 6:10 PM on October 22, 2004

In one case (someone with more Google patience than I can document this) a woman was prosecuted for insider trading because she owned a Manhattan sanitation company. She managed to extract enough information from the trash of major corporations to get ahead of the curve investment-wise and made a couple hundred grand before they found her.
posted by IshmaelGraves at 11:23 PM on October 22, 2004