Insiders

Ben and I were talking about the rules around insider trading and it occurred to me that I really don't know what they are, specifically. Well, it depends how specific you want to be, it gets complicated fast as the rules differ by jurisdiction (what applies to an MP does not automatically apply to an MLA, etc.). That said, here's what I found out and now believe:

1. In general, there is no problem (MP, MLA, mayor, president of a company, etc.) for anyone to buy or sell and stocks.

2. However, people in such positions are prohibited from trading on inside information.

3. To enforce this, they are generally required to disclose anything material. In the case of MP's, they must list all their assets when they start their new job, and, keep this list up to date. BC has a similar rule which extends down to the municipalities.

4. The major exception to all this that I found (I am sure, and hopefully there are, others) are federal cabinet ministers. They must either sell everything, or, put it in a blind trust. (I sort-of know about this because way back when I worked at Pemberton Securities, they had an account for the "Pat Carney Blind Trust").

5. There is talk of applying similar rules to US congresspeople. This sounds to me like sort of talk that is hard to argue against but will never actually go anywhere.

Of course within this, there is a ton of wiggle room. Does Ken Sim's billionaire son, or best friend, have to disclose that he owns 10% of a company about to benefit from a new project in Vancouver? If Ken Sim personally profits, there is no doubt that he would be in trouble. But beyond that, it sounds like it would be extremely case-specific (lawyer $$$$$).

In the course of thinking about this, it occurred to me that I had always thought of the term "federal government" as synonymous with "central, country-level government", but that this would only make sense in a federalist system (where much power is given to the provinces - in the constitution, eg. not at the discretion of the central government). Indeed, Gemini confirms that, technically speaking, it does not make sense to talk about, say, the UK federal government.

--

By the way, the Economist likes to argue that insider trading laws are not only futile but philisophically wrong. Eg. if an insider has information that would affect the stock price, you WANT him to trade, to improve the accuracy of the stock price. I am unswayed by this argument, but I AM swayed by the impossibility of enacting an "insider not trading" law.