Can I get in trouble?

[Ned Flanders]

After Thanksgiving dinner a woman(who had a few too many cosmos) offered some stock advice to the group.
She told us to invest in her company because they will be getting additional funding and new strategic partners in the next few weeks. If I take advantage of this and make money, am I doing anything illegal? Was she?

Thanks

[Edited by Ned Flanders on 11-28-2000 at 02:49 PM]

 

[ALawyer]

Interesting proposition.

She might have been making up the story to encourage trusting fools to part with their money and invest in the company and thus help drive up (or prop up) the market price of her company's shares, or to sell shares of a non-public company. Making a materially false statement in connection with the offer or sale of securities is a violation of Federal and state securities laws and might also be an actionable artifice to defraud.

On the other hand, if she believed what she was saying and the information was material she may have been improperly giving out material inside information, which is also illegal, and in any event a breach of her duty to the company she works for.

Saying merely "our company is doing real well and has deals in process and expects to raise money" probably is not material information. Stating that "we are merging with AT&T at $10 over current market next Thursday is." Materiality often depends on context and exactly what is said and the source and your relationship to the source. If the information was material and you know the source has that access to information and you buy the shares you'd be committing a violation as well.

 

[lawrat]

I am a law school graduate. What I offer is mere information, not to be construed as forming an attorney client relationship.

Insider info.

 

[HomeGuru]

Blabbing insider trading info while intoxicated is a violation of the Securites and Exchange laws pursuant to Article 151 of the Bureau of Alcohol Tobacco and Firearms Act.