012: Insider Trading Laws and SEC Rule 10b-5


In May 2001, senior executives of a publicly traded company on Nasdaq met to discuss the implications of negative news and its potential impact on the company’s stock price. The VP of investor relations had insider information that ordinary investors did not know. He used that inside information to make trades in the stock. He then passed the information to his brother, a registered broker, who also made trades for a sizable profit. Regulators at the SEC learned of the brothers’ suspicious trading activities, and began to investigate.

All the information in this case study comes from government press releases and articles referenced below.