I suspect there will be an SEC investigation.
1. https://viceroyresearch.files.wordpress.com/2018/03/amd-the-...
I would hope that intentionally spreading false information to manipulate stock prices would be illegal, but it may be hard to draw the line between subjective interpretation, intentionally misleading interpretation, and outright lies.
Trading on a security vulnerability that has not been made public is, on a basic level, not insider trading. Contrary to popular belief, there is nothing illegal about trading on material, nonpublic data. Insider trading requires the trader to have a confidentiality agreement governing the data with the company, or to have a fiduciary duty to shareholders of the company.
There are basically two situations in which trading on the vulnerability would be illegal insider trading:
1. You work for the company, or are a consultant engaged by the company, and you have knowledge of the vulnerability, or
2. You report the vulnerability to the company as an outsider and, in the process, enter into a confidentiality agreement.
Regarding scenario 2, merely reporting a vulnerability wouldn’t cut it. If you report the vulnerability through a channel that requires you to accept a confidentiality agreement as part of the terms and conditions of reporting (such as a bug bounty platform, like Hackerone or BugCrowd), then you can’t trade on it. On the other hand, if you report the vulnerability through a channel with no constraints, such as to a security@ email address, you have no confidentiality agreement.
Not insider trading, but definitely worthy of SEC inquiry. It's like a short position pump-and-dump.
No, it's not. Short selling is not a populist activity, but it's essential for disciplined price discovery. This type of behavior is EXACTLY what the SEC and other regulators want to encourage: self regulation. This is a market solution to a market problem. These vulns may or may not be significant, and the people behind the release may be shady...but this is what society should want to see from market participants. It's no different than performing forensic accounting and discovering massive fraud. There have to be incentives for investors to perform due diligence, and if people only get compensated by rising prices, there will be no incentive to uncover the frauds.
Furthermore: using market-based incentives risks undermining other approaches - even when that's to the detriment of society. Here too there are indications of that: for maximum gain, a speculator needs to cause a scare - and thus needs to cause maximum damage and impact (on the AMD stock - if indeed that's what they're doing). It's no coincidence that responsible disclosure was not followed here! Whether in the long run that's actually a bad thing isn't something I'm sure of - but it's a factor that does need considering.
Finally: self regulation is intellectually neat: and that's a risk, because people are biased towards simple and clever sounding solutions. There's nothing wrong with trying that approach; but assuming that SEC and other regulators themselves are rational actors in this matter strikes me as being overly optimistic. They aren't immune to partisan politics; and may suffer from regulatory capture. We should at least be open to the risk that some self-regulating processes may simply be inefficient. (The alternative need not be no self-regulation whatsoever).
Perhaps I misunderstood this, but it seems to say that since stock regulators are human with inherent human failings, they should take a larger role in stock trading? That seems confused; what is meant here?
This is different than "performing forensic accounting and discovering massive fraud". It's more like performing forensic accounting, finding only a few errors, but nevertheless claiming massive fraud.
The real reason this is not insider trading is that there is no information provided from the inside here - simply deducing facts from outside information is both legal and ethical (though if you do have material inside information, claiming that it could have been deduced from outside is not a defense.)
Nit: “material inside information” isn’t illegal, and would not have to be defended at all ordinarily. Material, nonpublic information can be deduced from the outside, in which case it’s not illegal, because you are not an insider by confidentiality or fiduciary requirements. In fact, you can even trade on information provided to you by an insider with such constraints, so long as you were not entered into agreement with the same constraints, and so long as there is no quid pro quo between the parties.[1]
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1. Though lately, the SEC has been getting more aggressive and trying to lower the bar for a quid pro quo to “friendship”...
I'm not a lawyer.