Thursday, February 22nd 2018

SEC Warns Tech Execs Not to Trade Stock When Investigating Security Flaws

The United States Securities and Exchange Commission (SEC) came down hard on silicon valley executives trading company stock when their companies were investigating security or design flaws that could potentially bring down stock value; as something like that borders on insider-trading, a felony under US law. This comes in the wake of senior executives of credit rating company Equifax, and chipmaker Intel, dumping company stock while their companies were investigating security flaws in their products or services. Intel CEO Brian Kraznich raised quite a stink when reports emerged that he sold $39 million worth Intel stock while the company was investigating the Meltdown and Spectre vulnerabilities in its processors (which hadn't been made public while he dumped the stock).

The SEC has come up with a far-reaching new guideline to keep tech execs from exhibiting similar borderline-insider-trading behavior. "Directors, officers, and other corporate insiders must not trade a public company's securities while in possession of material nonpublic information, which may include knowledge regarding a significant cybersecurity incident experienced by the company," the new guideline reads. "There is no doubt that the cybersecurity landscape and the risks associated with it continue to evolve," said SEC Chairman Jay Clayton. "I have asked the Division of Corporation Finance to continue to carefully monitor cybersecurity disclosures as part of their selective filing reviews. We will continue to evaluate developments in this area and consider feedback about whether any further guidance or rules are needed."
Source: Bleeping Computer
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12 Comments on SEC Warns Tech Execs Not to Trade Stock When Investigating Security Flaws

#1
Ubersonic
How the hell does that "border on insider-trading"? If you learn of a flaw in your product and know that the information will tank your companies share price when made public then you sell off shares to unknowing buyers in response that is textbook example of insider trading.
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#2
First Strike
In retrospect, Mr. Krzanich's decision seems to be pretty bad, because the stock price got even higher after the reveal of the vulnerabilities.
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#3
Totally
In other words the since Intel and Equifax guys by the letter of the law didn't break it there no punishment for them meanwhile said laws are being revised to cover this loophole.
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#4
rtwjunkie
PC Gaming Enthusiast
Ubersonic
How the hell does that "border on insider-trading"? If you learn of a flaw in your product and know that the information will tank your companies share price when made public then you sell off shares to unknowing buyers in response that is textbook example of insider trading.
:laugh: IKR!
“Now Brian, please don’t do that again. If you do, the next time we will have to warn you that we will punish you if it happens again after that.”
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#5
evernessince
The rich get richer and the Poor get poorer. Heck, even debetor's prison is coming back in America. At this point Americans might as well be living in 1800s england.
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#6
timta2
The US is becoming more of a joke by the day.
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#7
lewis007
In short CEO Brian Kraznich is a scumbag.
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#8
FordGT90Concept
"I go fast!1!11!1!"
Yeah, SEC is putting people on notice that this kind of insider trading will no longer be tolerated. Kraznich is safe this time.
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#9
Aquinus
Resident Wat-man
FordGT90Concept
Yeah, SEC is putting people on notice that this kind of insider trading will no longer be tolerated. Kraznich is safe this time.
Bullshit if you ask me. These people knew exactly what they were doing and should have been charged with insider trading. I'm getting sick and tired of all these slaps on the wrist.
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#10
FordGT90Concept
"I go fast!1!11!1!"
Traditionally insider trading is linked to financial information like quarterly report hugely missing targets that hasn't been made public yet. Equifax and now Intel insider trading is related to security vulnerabilities that are internally known but not publically declared. SEC saw that as an important distinction and gap that they've now closed. If Kraznich knew he couldn't get away with it, he likely wouldn't have done it. No he (and everyone else) knows they can't.

Remember, insider trading is a felony. I think they should try to slap a misdemeaner on him and fine him a percentage of the value of the stocks he sold and do the same to Equifax insiders. Going forward, it should be a felony like financial insider trading so people don't do it.
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#11
Aquinus
Resident Wat-man
FordGT90Concept
Traditionally insider trading is linked to financial information like quarterly report hugely missing targets that hasn't been made public yet. Equifax and now Intel insider trading is related to security vulnerabilities that are internally known but not publically declared.
...which, when made public, can impact market value. To me, there is no difference because they what would have been the same result; hurting value. They saw a problem that was going to harm stock price that wasn't information provided to the public yet and it was acted upon. I don't really care if it was a one step or two step problem, the result is literally the same. Going after them would have sent a much more clear message that this kind of behavior will not, under any circumstances, be tolerated.

I don't disagree with your statement but, i don't think that's a loud enough message.
Posted on Reply
#12
Totally
Aquinus
...which, when made public, can impact market value. To me, there is no difference because they what would have been the same result; hurting value. They saw a problem that was going to harm stock price that wasn't information provided to the public yet and it was acted upon. I don't really care if it was a one step or two step problem, the result is literally the same. Going after them would have sent a much more clear message that this kind of behavior will not, under any circumstances, be tolerated.

I don't disagree with your statement but, i don't think that's a loud enough message.
When it comes to semantics lawyers don't care, unless it happens to be in their best interests.
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