Insider Trading Is Sometimes a Family Affair

Let's say you are the chief executive officer of a company that is about to announce a big merger that will push up its stock price. And let's say you tell your best friend about it. And let's say he buys stock in the company and makes a lot of money. Is that insider trading? The answer -- to everything1468939532712 -- is "it depends," but I think there are three possible answers.

One is that it is insider trading in a straightforward traditional way: You are the tipper, he is the tippee, and you breached your fiduciary duty to your company and its shareholders by giving him information to trade on. (Normally prosecutors also need to show that you got a "personal benefit" from his trading, though it's a little unclear whether really close friendship can qualify as that benefit. But of course if he gave you sacks of cash, that counts.) You are guilty of insider trading. Your buddy probably is too.1468941219224