Episode 2
Season 1
Insider Trading
Insider Trading Generally:
What is the law: It is important to know generally that this does not apply TO EVERY corporation but rather just what are called 34’ act companies larger corporations that have $10 million in assets and 500 shareholders of record at end of fiscal year.
What is an insider?
To begin, this is just our very GENERAL understanding of what insider trading is through articles and what we have learned in our Business Associations (Business Formations). But if you want a more IN DEPTH understanding of these things and the intricacies of the law I would point you to the 33’Act, 34’ act, RUPA(Revised Uniform Partnership Act), RULPA(Revised Uniform Partnership Act), RULLCA(Revised Uniform Limited Liability Company Act.
Links mentioned in this episode
Phils Insider Trading Escape https://www.golfdigest.com/story/phils-insider-trading-escape
https://money.cnn.com/2016/12/19/news/fbi-leak-phil-mickelson-case/index.html
http://fortune.com/2016/05/21/phil-mickelson-insider-trading-scandal/ https://www.dallasnews.com/business/food-industry/2017/10/19/judge-dean-foods-chairman-facing-2-years-prison-paraded-dallas-peacock
https://www.investopedia.com/articles/02/061202.asp
https://www.investopedia.com/ask/answers/what-exactly-is-insider-trading/
https://www.sec.gov/Archives/edgar/data/25743/000138713113000737/ex14_02.htm
Insider Trading Generally:
What is the law: It is important to know generally that this does not apply TO EVERY corporation but rather just what are called 34’ act companies larger corporations that have $10 million in assets and 500 shareholders of record at end of fiscal year.
What is an insider?
To begin, this is just our very GENERAL understanding of what insider trading is through articles and what we have learned in our Business Associations (Business Formations). But if you want a more IN DEPTH understanding of these things and the intricacies of the law I would point you to the 33’Act, 34’ act, RUPA(Revised Uniform Partnership Act), RULPA(Revised Uniform Partnership Act), RULLCA(Revised Uniform Limited Liability Company Act.
“Directors and Officers of the issuer of such security, and every person who is directly or indirectly the beneficial owner of more than 10% of any class of any equity security which is registered pursuant to the ’34 Act.”
But in reality almost anyone is an insider.(any one who has material nonpublic information can commit insider tading.
Legal vs. Illegal insider trading:
Legal:
Of course, insiders are allowed to trade generally, but there trading is very regulated and watched by the SEC.
Form 3 – initial filing
When one becomes an “insider”
pre-existing in a corp that becomes a ’34 Act corp
OR, when they become insider in a corp that is already a ’34 act corp
Form 4 – Engage in Transactions
Filed each time the insider trades
Must be filed w/in 2 days – and the date of the transaction counts as day 1
Form 5 – Annual Filing
Done to clean-up previous year, catch any omissions that should have been reported.
These are very simple forms. Can now be filed electronically using EDGAR system – which helps to alleviate 2 day time crunch.
Also once you obtain a certain number of shares, you have to report them to the SEC.
Illegal:
conclusive presumption that if insiders purchases and sells (or sells and purchases) his or her corp’s shares w/in 6 mo. period then that transaction was based on material inside information.
We want to compare Phil Mickelson and Mychal Kendricks
Mychal Kendricks
The charges
Following pleading guilty to insider trading in August, he’s set to be sentenced in late January and faces anywhere from 30 to 37 months in federal prison. (Adam Schefter).
Potentially 31 years of age when he gets out. Football is a lot different than Golf
Impact to their sport (did they get suspended etc)
Suspended indefinitely but then lessened to 8 games. Already served 3 and will be able to return for week 12 game as SEA makes playoff push (maybe, KJ Wright is back and we will see if he is apart of the plans)
“I’ve just been in support of him and tried to stay abreast of it,” Seahawks coach Pete Carroll said Friday. “Really, what I’m concerned about is Mychal and trying to keep him attuned to what’s going on because it’s a very difficult situation to be in limbo.”
League might not be able to discipline him (not on a roster not apart of league)
How he DID NOT get out of it
Pleaded Guilty
Phil Mickelson Insider Trading:
news specifically.
The charges
SEC Alleged that Mickelson had netted $931,000 in stock-trading profits related to insider trading. Essentially though Phil got out of this spot free
Impact to their sport (did they get suspended etc)
NO
All Phil had to do was pay back the money he had gained + $100,000
How he got out of it
PHIL never admitted any guilt in the process and Mickelson’s lawyer has been quoted as saying he is an “innocent bystander”.
One of the problems was that there was no “smoking gun” incriminating Mickelson → had no proof that phil knew where walters’ information was coming from
WE are NOT here to say he did or did not do anything alleged as the facts were far from stipulated.
But the point of Mickelson we are trying to portray is the lack of punishment in this scenario from both the Sports Entity he represents and the justice system itself regardless of if he was guilty or not. Because as we have seen in sports sometimes you do not have to be proven guilty to be seen as such from your “league”
For instance Walters, got five years in prison and 10 million dollar fine.
Davis got Two years in prison.
How they are different
Careers of Golfer vs NFL LB Potentially 31 years of age when he gets out.
One is alleged to have broken the law and the other admitted to doing so. Those are two huge glaring differences for sure.
