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Comment by slavik81 | Hacker News Reader

The SEC complaint linked at the bottom of that page[1] literally has a minute-by-minute account of how the CIO of Equifax's US information systems business unit was told there had been a major incident, started Googling about the stock market's reaction to a previous breach at Experian in 2015, and then an hour later sold all his shares for $950,000.

Maybe the CEO broke the law too, but the CIO left a clear trail of evidence. He is neither a little guy nor a fall guy.

[1]: https://www.sec.gov/litigation/complaints/2018/comp-pr2018-4...

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I'm surprised a C level exec can sell their shares like that. I thought they all had to announce ahead of time? I'm a lowly employee at a big tech company and I have blackout periods.

They typically not required to provide advance notice (by law, at least,) but they often do set up a sell schedule in advance to show that they're not selling in response to non-public information. Sort of like developing data retention policy to avoid obstruction/anticipatory obstruction charges.

In the SEC briefing, it is noted that there were two teams deployed: Project Sierra and Project Sparta. Only Sierra had knowledge that Equifax itself was breached and thus a blackout period was instituted. But not for Sparta where the CIO was assigned.

I'm an Equifax employee...I can confirm this. I heard about "Project Sparta" constantly, but didn't know until the day of the public announcement what it was. I had no idea it was Equifax that was breached until everyone else did. I never even heard about "Project Sierra" at my level.

It’s not as black and white as it seems: the CIO was not directly told that Equifax itself had suffered a breach, simply that one of their clients had been.

[1] https://www.bloomberg.com/view/articles/2018-03-15/is-inside...

[2] page 6 of https://www.sec.gov/litigation/complaints/2018/comp-pr2018-4...

As Stringer Bell said, https://www.youtube.com/watch?v=pBdGOrcUEg8

It's always amazed me that the SEC standard is proving insider trading willfully took place. Which is a pretty high bar. How about...

If we can prove you knew about it, we convict you.

If we can't prove you knew about it, but your transactions appear to be insider trading to a jury, then you have to zero out the transactions (either by repurchasing equivalent stock or some other method).

You don't get charged, but there's no "getting away with it" either.

How about "guilty beyond all reasonable doubt" as a burden of proof for our systems of judgment. As much as that sucks sometimes.

If the government can't prove its case, it probably shouldn't be getting to a jury either.

It's pretty easy to cover your tracks if you're not an idiot and know what you're doing, and I assume a lot of the people that make big insider trading plays are neither.

So hamstringing the SEC with an arbitrarily high standard just facilitates continued insider trading.

Agreed on the full burden of proof for penalties. But having your gains clawed back is a different fish entirely.

But having gains taken away is a penalty.

...

If the SEC pursues a civil case where the penalty is only fines and not prison, the standard need only be a "preponderance of evidence." It's much easier to prove that some of these executives probably knew about the news when they sold their shares.

With a lower standard for guilt, a greater number of innocent people will be fined by our government, for which we are ultimately responsible.

A greater number than are currently charged, sure, but a far smaller number in absolute terms causing a far larger amount of damage than the ordinary Americans for whom a criminal charge—which is made essentially entirely at the discretion of the DA—will remain on their records permanently, affecting their ability to travel and obtain jobs.

To zero out someone’s gains in this situation, as suggested by the parent poster in cases where no proof exists, would simply be a regulation to hold one financially responsible for his/her company’s actions. Guilt or innocence doesn’t have to come into play in that scenario.

Ostensibly the market already takes care of that in the form of stock price.

This entire thread is focused on the one situation where the stock price doesn't take care of it: When an employee sells their stock before a major price drop in a way that it's unclear if the employee knew about the reason behind the drop or not.

The article sates that he sold stock in anticipation of the price dropping and by doing so saved himself $117,000.00. The SEC believes this to be an illegal trade so now he is facing charges. If he had traded legally the market would have punished him for the company's failings.

In this situation everything seems to have worked correctly.

If you think the stock price should be lower take it up with your elected representatives and see what happens when regulations are put in place.

You're again missing the entire point of this conversation.

Yes, the evidence was clear in the case of the CIO, and everything worked as it should in the case of that one person. But as craigc noted, three other executives managed to sell shares before the price drop, so there's a question of how likely those three were to have known about the situation but by chance happened to have no clear evidence against them. That leads to the question of what can be done to more effectively prevent executives from engaging in insider trading in situations where they are aware that the evidence will be too scant to prosecute. One solution proposed was to zero the transactions of stock sales by executives that occurred shortly before an event like this. Saying "the stock price will take care of it" makes no sense in this context.

I don't think we can fix the lack of evidence by lowering the standard of proof.

If you wanted to advocate stronger reporting requirements for what executives knew and when then I'd be more comfortable.

But my point is that if we implement a policy to rollback but otherwise not punish executives who sell stock right before an event like this (notwithstanding any actual other crimes related to insider trading that could be prosecuted separately; for example tipping someone off), the standard of proof becomes irrelevant.

Personally, I think the solution is to not allow executives to sell stock without publishing a schedule in which the first sale is more than 9 months from the date of the announced schedule.

Not if they sold before, which is what this whole thing is about.

Yeah our civil court system fucking sucks.

Edit: I used to work in the legal industry nearly exclusively in civil court.

Can you elaborate? In what specific ways does it suck? Do you have any suggestions for improvement?

How does charging someone require "guilty beyond all reasonable doubt"? Sounds like a conflation between charging with a crime and convicting someone.

Aware he said "convict" but he probably meant "charge".

Imposition of any penalty is a conviction unless there is a voluntary plea. Charge is absolutely not what he meant, especially since that was a base he already explicitly covered.

How about we stop pretending that information asymmetry isn't a core aspect of the stock market?

Insider trading laws seem tailor made to make sure wall street, and only wall street, is playing with a stacked deck.

This has been looked at before, but the summary from this paper (by the Atlanta Fed) is a good (and as far as I know, unbiased) place to start: https://www.frbatlanta.org/-/media/documents/filelegacydocs/...

Here's a simpler proposal: when an insider sells shares, they go into limbo for 180 days, then they get sold at the then-current price.

Simpler proposal: Existing sale of stock disclosure laws are all we need.

> It's always amazed me that the SEC standard is proving insider trading willfully took place. Which is a pretty high bar.

Systems fail, so you have to ask which way you want it to fail.

We go by Blackstone's formulation: "It is better that ten guilty persons escape than that one innocent suffer". The founding fathers often quoted this and it is an integral part of American law.

Yeah, it often sucks and many guilty people go free. I'm sure you can think of specific topics where it is particularly difficult. But we chose to fail this way because we value freedom so highly. So the prosecutor has the burden of proof. This is often why trials go for so long and it takes a long time to form a case.

tldr: It is purposefully a pretty high bar.

You forgot the addendum:

No member of congress, the administration or closely related shall ever be punished for anything. For instance, for taking legal action to protect the very company this is about:

https://techcrunch.com/2017/10/24/congress-votes-to-disallow...

And I'm sure there were zero financial interests behind that decision.

You might say : this is not insider trading. I agree, this is much worse: this is taking legal action to protect their own financial interests after they were legitimately punished by the market. That's far, far worse and explicitly not what the legislative authority should be used for.

This is a horrifying proposition. Are you seriously suggesting suspending the presumption of innocence and substituting mob rule?

I feel there's a pretty firm distinction between "you get to keep a good thing" and "we're forcing a bad thing upon you."

I don’t think the line is clear and I don’t think it’s relevant either.

You’re still seemingly ignoring the presumption of innocence and burden of proof. You seem to place a higher value on punishment of perceived wrongs than on liberty.

That quite frankly terrifies me.

How is "I'm going to lock you in prison" remotely similar to "I'm going to take away your profits and leave you as you were before the trade"?

If you don't see a difference between the two... we have very different views of the world.

We’re talking past each other.

You have described two punishments. The only difference is severity. Further, your previous comment was far more vague than prison vs clawed back profits.

I value liberty above all else which means all punishment has a high burden of proof and all individuals are assumed innocent in the absence of this proof.

You seem to suggest setting a lower standard because it feels right to you.

That scares the hell out of me.

As you've expressed. And I feel you're being logically disingenuous by failing to gradate levels of punishment.

It's a straw man to say I'm suggesting there shouldn't be a high burden of proof for a severe punishment.

And whether a viewpoint terrified you or not is largely irrelevant.

Personally, I modulate my desire for individual liberty with what I consider a reasonable responsibility to nurture an environment where individuals are afforded opportunities to exercise that liberty.

I don't see how punishing (regardless of severity) someone who can't be proven to have broken a law "affords individuals opportunities to exercise liberty".

What you're advocating is mob rule and that's why it is scary.

Obviously there are different standards of proof but the presumption is always innocence and there is always a standard beyond how it "looks". This is preferable because it maximizes liberty.

Do you accept there are situations in which maximizing individual liberty lowers average liberty?

Mathematically I'm not sure how such a thing could occur.

If you are implying that liberty is zero sum then I disagree.

I'm also uninterested in average liberty. Individual liberty is of utmost importance. Individual rights extend as far as infringing on the rights of others. This is important only in the context of preserving further individual liberty.

Example:

(Case 1) A world in which individuals are completely free to do with their wealth as they will (so, no taxes, regulations, etc).

(Case 2) A world in which individuals are absolutely prohibited from wealth transfer. At the time of their death, all individual assets / privileges are seized, then redistributed evenly to the next generation.

Select a random individual from a new generation in each case.

Would you disagree that they have different effective individual liberty? That is, the options available to them to pursue in life?

Essentially, I see effective liberty as the product of rights and means to exercise those rights. And I believe the greatest individual liberty cannot be created without balancing both requirements.

Or better yet, treat trading & holding market assets as a privilege and not a right. Maybe it’s not worth pursuing criminal charges for any multitude of reasons, but having a quick release valve to make sure bad actors only get 1 shot.

And who decides the members of this privileged class?

If I get a speeding ticket do I lose my ability to trade? What about a fealony? What if I am on a no-fly list without due process?

Your "what-ifs" are just completely ludicrous, to the point where it does not appear that you are wanting to actually discuss the topic.

They are not ludicrous at all.

A few years ago it was suggested we use the no-fly list to prohibit gun purchases. And that's an explicitly granted constitutional right. Felons already lose rights such as voting. How "quick" would this release be?

If we treat participation in the stock market as a privilege I think it's entirely reasonable to ask who gets that privilege.

well the thought was that it would strictly be tied to actions dealing with the market. there’s a lot of other people’s money in the market, bad actors are capable of creating markedly more damage than personal benefit. this is more about making sure someone with capital can’t repeatedly do dodgy things.

but yeah, it’s a weird hypothetical and the SEC is going after a bad actor here, so maybe the system is working

Just clarifying this in case it wasn't clear for others.

There is an Equifax global CIO above the Equifax US Info Systems business unit CIO. Global CIO knew, Info Sys CIO inferred.

I have to agree. He literally knew about the breach and then sold them. He's definitely got to go down, I'm sure he knew that what insider trading is.

These days Google hands out your info to LE like its a street candy; it wasn't like this back in a day when I was a Noogler at least they had whole team looking at every single LE request; these days, I bet its just a blanket [select all], [accept].

Just another reason to switch to DuckDuck go, whether you are doing something shady or not.

Are you sure the information about his search history came from Google, as opposed to IT network logs or forensic examination of his computer?

The complaint makes reference to "Ying’s internet browsing history" which sounds more likely to be one of the latter...

The complaint doesn't actually say what search engine he used. Sorry, I probably shouldn't have used "googling" interchangeably with "searching".

Or, and hear me out on this, maybe, just maybe, don't do shady things? This guy didn't get in trouble because he used Google. He got in trouble because he was breaking the law.

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