INSIDER REGULATION

Insider's Strikeout with Short-Swings

What can't insiders get away with? The news is full of cases of insiders making flagrant trades, take Trevor Milton, founder of electric truck startup Nikola (pictured above). Whose stock tanked when it was revealed promotional video of his electric truck "driving" was just it rollling down a hill with the battery removed to prevent risk of fire. Mr. Milton was later prosecuted by the SEC for false and misleading statements to investors. Clearly lying about your business is prosecutable.

Where's the bar insider's are locked up for limboing under? It might be higher than you think. SEC Rule 10-5b prohibits using confidential corporate information to reap a profit or avoid a loss by trading a companies stock, or tipping third-parties off so they can reap a profit. Of course, if this rule was effective it would be the only one the SEC needed. Something more concrete is the short-swing profit rule. If an insider profits from making both a buy and sell within a six month period they must return all profits, not pass go, and not collect $200. A sad truth for people looking to day trade insider sentiment but, a hopeful signal for value investors looking to trade underlying companies.