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I need some legal information about Insider Trading - Gathering TSLA information

MitchJi

Trying to learn kindness, patience & forgiveness
Jun 1, 2015
3,989
8,907
Marin County, CA
Hi,

I think I can find a Tesla employee who can supply us with information like the following (I think the odds are about 90%), but before I do that I need some information about the legalities of Insider Trading:
http://www.streetinsider.com/Analys...ory+Gearing+Up+-+Pacific+Crest+/10681668.html
...Following a factory visit in Fremont, analyst Brad Erickson noted the company was "gearing up" for the Model X, and he expects investor optimism to grow into the launch.

"We were encouraged to see Tesla's new body line (called Body Line 2) beginning to pilot Model X shells, and we view this as a good sign toward the company being able to launch the vehicle "on time." Compared to Body Line 1, the sheer size and greater number of production robots (we'd estimate 3x to 4x) was evident, and we couldn't help but notice several buses worth of new employees receiving training for the new line. To say the mood in the factory is one of "gearing up" would be an understatement," said Erickson...

I think that having regular access to this type of information would be extremely useful. But I don't want to ask anyone to do anything illegal, or get anyone in trouble for illegally disclosing insider information and I'm not sure exactly what crosses that line. My first thought was that only high level employee's would have access to that type of information, but it doesn't look like that is correct:
http://www.sec.gov/answers/insider.htm
Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Examples of insider trading cases that have been brought by the SEC are cases against:

Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

Rule 10b5-1 provides that a person trades on the basis of material nonpublic information if a trader is "aware" of the material nonpublic information when making the purchase or sale. The rule also sets forth several affirmative defenses or exceptions to liability.
http://www.investopedia.com/articles/03/100803.asp
Using nonpublic information for making a trade violates transparency, which is the basis of a capital market. Information in a transparent market is disseminated in a manner by which all market participants receive it at more or less the same time. Under these conditions, one investor can gain an advantage over another only through acquiring skill in analyzing and interpreting available information. This skill is based on individual merit and awareness. If one person trades with nonpublic information, he or she gains an advantage that is impossible for the rest of the public.
It looks like I need a legal definition of material nonpublic information.

EDIT ADDITION:Would posting on the forum convert illegal "nonpublic information", to legal public information? Would doing that displease Tesla? And would it be allowed on TMC?

I'm not concerned with morality of using this type of information for making trades. Analysts obtain and use exactly the type of nonpublic information that I want to obtain. Since 100% of that information is not immediately made available I don't think it is wrong to at least try to obtain a level playing field.

A related question, is If I can find someone, I don't know how to quietly share the information with others on the forum. If it's useful information I would be happy to share it with this community, but I don't want to start a feeding frenzy type of scenario.
 
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dhrivnak

Active Member
Jan 8, 2011
4,495
3,762
NE Tennessee
At my company, according to our annual ethics training. We would consider that unethical and would be grounds for dismissal. But I do not work at Tesla.
 

yobigd20

Well-Known Member
Oct 28, 2012
5,929
532
Skaneateles, NY
I think I can find a Tesla employee who can supply us with information like the following

just that statement alone sets off red flags that what you're trying to do probably isn't legal. i would think any kind of inside confidential information that the general public doesn't have access to would be considered "material, nonpublic information". this would include those kinds of statements from internal employees.
 

drinkerofkoolaid

Active Member
Nov 3, 2012
1,816
1,756
F
Does the analyst own any shares of Tesla Motors? Probably no.

This is part of the reason why many companies have a policy that journalists they employ are not allowed to own shares of companies they report on.
 
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hockeythug

Active Member
Jun 3, 2013
1,979
879
Minnesota
Does the analyst own any shares of Tesla Motors? Probably no.

This is part of the reason why many companies have a policy that journalists they employ are not allowed to own shares of companies they report on.

This. Also, I wouldn't call what the analyst wrote material or nonpublic. Tesla has publically stated that a second production line was being build and has given production guidance. He could be guilty of adding a little color but that is all.
 

austinEV

Supporting Member
Supporting Member
May 16, 2013
3,231
7,352
Austin
My understanding of "the line" is this: if you walk by the factory and see through a window that they are making an electric plane, you could post that and/or trade on it. It is material insider info, but you aren't an employee, SEC employee, board member, etc (I assume) so you aren't bound by any restriction. That is basically the sport we engage in: can we read tea leaves and indirectly figure out something that TM didn't mean to say or something.

However, if your friend works there and tells you about the electric plane both you and he are insider trading, if that information leads to a trade by you, or anyone you tip. Even if the trades lose money because the plane is a terrible flop, it doesn't matter. Even if the friend doesn't trade he is insider trading.

Someone correct me if I have it wrong. By my definition, I always assumed if you see something you weren't supposed to on a factory tour it would be fair game to trade on. Tipping everyone such data would be a violation of the NDA of the tour though.
 

Robert.Boston

Model S VIN P01536
Oct 7, 2011
7,844
41
Portland, Maine, USA
IANAL, and you should consult one before undertaking what you're suggesting.

By providing you the information, the employee will have breached his or her NDA which was part of his or her employment agreement. As we've recently seen, Tesla does not tolerate internal leaks and will fire then sue this individual. I can't imagine why, therefore, anyone would risk his job to provide this information.

Again, IANAL, but Investopedia defines it thusly:
Material information, about certain aspects of a company, that has not yet been made public but that will have at least a small impact on the company's share price once released. It is illegal for holders of material insider information to use the information - however it was received - to their advantage in trading stock, or to provide the information to family members or friends so they can use it to make trades.
So if you get this information and trade on it, you could end up serving time. If any information of this sort gets posted on TMC, we pull it as quickly as possible.

Bottom line: just don't. Please.
 

davewill

Active Member
Feb 5, 2014
1,828
1,983
San Diego, CA, US
... Someone correct me if I have it wrong. By my definition, I always assumed if you see something you weren't supposed to on a factory tour it would be fair game to trade on. Tipping everyone such data would be a violation of the NDA of the tour though.
If you had to sign an NDA, wouldn't that be notice that the info from the tour is confidential and non-public?
 

austinEV

Supporting Member
Supporting Member
May 16, 2013
3,231
7,352
Austin
IANAL, and you should consult one before undertaking what you're suggesting.

By providing you the information, the employee will have breached his or her NDA which was part of his or her employment agreement. As we've recently seen, Tesla does not tolerate internal leaks and will fire then sue this individual. I can't imagine why, therefore, anyone would risk his job to provide this information.

Again, IANAL, but Investopedia defines it thusly:

So if you get this information and trade on it, you could end up serving time. If any information of this sort gets posted on TMC, we pull it as quickly as possible.

Bottom line: just don't. Please.


Yeah, don't touch this stuff. I have an acquaintance that got hit with it. I had to come in for interviews just because I was at a social event with him at the wrong time. I had no idea if I was under suspicion and it was scary as Hell. (before someone says it, I suppose I should have lawyered up. As it happens I wasn't guilty, but there was a chance I could have said something incriminating in my ignorance.)

- - - Updated - - -

If you had to sign an NDA, wouldn't that be notice that the info from the tour is confidential and non-public?

Well, that is my question. Putting aside the insider source, which is always illegal, what if the tarp flew off of the electric plane during a factory tour and I happened to see it? I would be bound to not TALK about it, but couldn't I legally make private trades on that, assuming I could figure out how to benefit from it (unlikely).
 

drinkerofkoolaid

Active Member
Nov 3, 2012
1,816
1,756
F
IANAL, but someone once explained it to me this way. If a person is in a coffee shop, overhears the CEO of a company say something to someone, and immediately buys shares in response to what he heard, the person who overheard the conversation has not committed any crime.

If a person leaks information online that is not supposed to be public, the websites the information is posted on, usually have no obligation to remove the information, unless it contains information that is copyrighted.

Likewise, anyone who reads leaked information on a forum, and initiates a trade based on that information is not guilty of a crime for the same reason the person who overhears a conversation in a coffee shop isn't guilty of a crime; the person wasn't involved in the initial conversation, and doesn't know if the information is accurate.

Is my understanding correct?
 

AB4EJ

Member
Feb 25, 2015
774
379
Tuscaloosa, AL
Because there are so many people who follow every little move that Tesla makes, and trade based on these things, practically anything that a Tesla employee says (including also consultants, contractors, and employees/contractors/consultants of Tesla suppliers) can influence the stock price. Therefore it could constitute illegal insider trading if they say anything about anything that was not officially announced through Tesla's Communications Department. This is the reason for all the NDAs flying around all the time. We had similar situation at Mercedes; any question posed to an employee, (or anyone in position to know anything, really) must be referred to Communications. Therefore the company speaks with one voice and does not attract unwanted attention from SEC, Federal Trade Commission, Justice Department, etc.
 

jeff_adams

Member
Mar 18, 2013
618
2
Monterey
I would suggest that people be careful how much they invest based on conversations with Tesla employees.

How many times over the years have we read posts where employee information that was passed on to forum posters turned out to be incorrect or totally false?

People have a bad tendency to hear what they want to believe instead of what is actually said. They take two separate facts and mash them together as a new fact. They aren't even conscious of doing it. Think of the children's game "telephone".

Add to that the high level of technical complexity that is Tesla and you have a situation ripe for factual errors by uneducated employees who speak on topics that are not their expertise.
 

Quant

Member
Apr 7, 2015
245
32
Austin, tx
Really ? Is this some kind of joke? As John McEnroe would say : You cannot be serious!! I think the moderator should soon delete this thread ! Just my opinion!
 

winfield100

Supporting Member
Supporting Member
Feb 16, 2013
2,991
11,210
vivant non-traveler
Really ? Is this some kind of joke? As John McEnroe would say : You cannot be serious!! I think the moderator should soon delete this thread ! Just my opinion!
agreed. this taints the whole series. my ethics folks require yearly disclosure of everything, so i avoid the word bio or anything similar. just the questions asked are dicey and lower the standards
 

austinEV

Supporting Member
Supporting Member
May 16, 2013
3,231
7,352
Austin
agreed. this taints the whole series. my ethics folks require yearly disclosure of everything, so i avoid the word bio or anything similar. just the questions asked are dicey and lower the standards

Nonsense! At worst we educated readers about insider trading. Chilling conversation doesn't benefit anyone.
 

doug

Administrator / Head Moderator
Nov 28, 2006
16,971
1,096
SF Bay Area
Ummm... It should go without saying, but if you're thinking of doing something that you think might be illegal, don't do it on TMC.
 

Jackl1956

Active Member
May 11, 2013
1,939
14,830
Los Angeles
The most intelligent thing I ever heard President Obama say, was advice he gave to a young man . The young man told Barack, I would like to be a politician when I grow up. Do you have any advice for me? President Obama told him to very careful with what he put on the Internet.
 

Auzie

Tree Hugger Member
Jul 29, 2013
1,898
37
Sydney
My risk analysis indicates the following activities might affect the odds:

1. Advance announcement of the planned activities, to streamline the process and make sure all is ready for the big act (TMC publishing is good enough)

EfficientDumbRobber.JPG


2. More efficiency improvement, by making sure you are easily contactable. This requires leaving contact details for easier identification (TMC avatar will do here)

Call Me to rob you.JPG


3. When all is done, make sure not to fall for the free beer (the most difficult one)

FreeBeer.JPG
 

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