united-states corporate-law finance securities insider-trading
Could the Intel CEO be accused of insider trading?
<p>A few weeks back, the Intel CEO <a href="https://www.fool.com/investing/2017/12/19/intels-ceo-just-sold-a-lot-of-stock.aspx" rel="nofollow noreferrer">sold all the company shares he was allowed to</a>. Yesterday, it was <a href="https://www.theregister.co.uk/2018/01/02/intel_cpu_design_flaw/" rel="nofollow noreferrer">reported</a> that a big security flaw existed in virtually all Intel processors sold in the last decade. Intel has known about it for several months and has informed the OS vendors so they could publish patches before the vulnerability was made public, as is the custom in these cases. This looks to my non-lawyer eyes like blatant insider trading. Is it?</p>

<p>The accusation would be the crime of securities fraud ("insider trading" is legally meaningless), under <a href="https://www.law.cornell.edu/uscode/text/15/78j" rel="noreferrer">15 USC 78j(b)</a>. There is a bit more elaboration in <a href="https://www.ecfr.gov/cgi-bin/text-idx?mc=true&amp;node=se17.4.240_110b5_61&amp;rgn=div8" rel="noreferrer">17 CFR 240.10b5-1</a>. That law prohibits using "any  manipulative  or  deceptive  device  or  contrivance  in" in connection with a securities transaction. Under <a href="https://www.law.cornell.edu/uscode/text/15/78ff" rel="noreferrer">15 USC 78ff</a>, violation of the law can result in a fine of up to $5 million and 20 years, thus it is a crime. As a crime, the standard of proof required is must higher than it in for a civil forfeiture (which can be as low as "reasonable suspicion"). In the US, and pursuant to the Due Process clause, that requires proof beyond a reasonable doubt, that is (from <a href="https://supreme.justia.com/cases/federal/us/397/358/case.html" rel="noreferrer">in re Winship</a>), "proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged". </p>

<p>The statute itself does not state the elements that must be proven to secure a conviction, but they can be discerned based on jury instructions (which are circuit-specific). The 9th Circuit instruction is <a href="http://www3.ce9.uscourts.gov/jury-instructions/node/415" rel="noreferrer">here</a>. You can see that there are 4 specific allegations that have to be chosen between, and the prosecutor has to have at least alleged one of those prohibited acts (so that the jury can decide if the prosecution has proven beyond a reasonable doubt that the accused did that thing).</p>

<p>The evidence you have presented could constitute "reasonable suspicion", but not "proof beyond a reasonable doubt". If we had a different standard of proof in criminal trials, where it was sufficient to just suspect based on a small bit of evidence that a person may have done something prohibited, then the conclusion could be different. Or, if you had stronger evidence surrounding the sale, your argument might carry a bit more weight. In other words, criminal prosecution is based on quite a lot of specific and objective evidence about what happened. An example of the kind of evidence and allegations required to get the ball rolling can be seen <a href="https://www.justice.gov/usao-sdny/press-release/file/994881/download" rel="noreferrer">here</a>; for "insider trading" specifically, look <a href="https://www.justice.gov/usao-sdny/press-release/file/980156/download" rel="noreferrer">here</a> (this case is based on an FBI investigation, where an agent will presumably testify to hearing the defendant state a plan to violate the law).</p>
