I'm a lawyer that works in the web-scraping space, and I always chuckle when I read threads like this. Almost every company that we now consider a monopolist (or their affiliates) in the tech space used scraping a part of their process to build their business, and almost every one of those same monopolists now prohibits startups and competitors from scraping their data (which, invariably, is not actually "their" data in any sort of legally cognizable sense). And so perhaps the ethics of web scraping are not so straightforward. And neither are the legal issues associated with it.
I wrote an article about that last fall that got some attention here.
Same thing with Facebook and identity. IIRC they leveraged Google’s address book to get traction, but will go after you if you try store FB social graph data long term for anything outside their garden.
You try to block the tricks you used to get growth, basically.
> And so perhaps the ethics of web scraping are not so straightforward.
It strikes me that the _ethics_ of web scraping are extremely straightforward and cognizable with a terse analysis:
* You can respond however you like to my HTTP request, and I can parse your response however I like.
Simple, traditional, common. This is the way that conversations have occurred since the dawn of human communication, no?
> the legal issues associated with it.
But aren't these, without exception, fabrics spun out of the cloth that shields established players with the threat of state violence? This is not particularly new, and seems to fit in the pathetic-and-predictable file.
Moreover, the broader cheap attempt to cast this in "intellectual" property terms, and to attach that to protection of artists and creators, warrants a very particular eye-roll for its illogic.
Do you apply this ethics to webs scraping only, or to all other network communications too?
Because if that's your general principles, you are making the internet much shittier. I still remember the old internet with open SMTP servers, easy-to-use comment forms, and forums which did not require emails and capthas. But people with "You can respond however you like to my HTTP request" attitude ruined it with spam, scam and SEO.
If you only apply this to web scraping, then where do you draw the line and why? Can you scrape at maximum rate server can support? Can you scrape if this requires active action (like account creation?) As long as you scrape, can you also post some links to improve your SEO?
> But people with "You can respond however you like to my HTTP request" attitude ruined it with spam, scam and SEO.
I don’t see how those things relate. They all have separate ethical issues. You can believe it’s ok to scrape whatever info you can find online at the same time as believing it’s not ok to scam people.
> Do you apply this ethics to webs scraping only, or to all other network communications too?
I mean... if you're keying in at 20MHz and blasting a gigawatt of noise, then yeah you've certainly run afoul of decency and just law. You're changing the physical shape of the network environment.
But if the concern is just that we don't like the bytes to which your signal decodes, or we don't like what you're doing with the response we give you, then it seems more like a speech/press issue.
The internet needs to grow resilience such that annoyances in the logical layers are easy to ignore if you have the will. But that almost certainly means that you don't get to police what people do with the content you willingly hand over, pursuant to the protocol in use.
If I say, “Hey, please don’t text me anymore. I’m going to block this number,” and you respond by buying 500 phones in five cities and text me nonstop, is that ethical?
Not sure the metaphor works here. For example most sites let Google scrape them as much as it likes, but go out of their way to block other robots. By doing so they are effectively forcing the whole world to use (or support, since smaller search engines have to piggyback on the big ones wih special status, and pay them) proprietary spyware.
In your analogy, most websites block everyone except the biggest pervert known to man.
yes, people like OP who get the farms of scrapers.
The website owners make their preferences clear with robots.txt, IP blocks and other antibot technology. Scrapers intentionally ignore owners' desires and force the to respond.
It's your job to separate the wheat from the chaff at the boundary of your network interface. In fact, personal boundaries of all sorts, from informational to emotional to physical to economic, are of paramount importance in the information age.
Nobody (and certainly not the state) is going to erect your personal boundaries for you by ensuring justice in the face of spammy text messages (or, for that matter, hypnotic and manipulative social media). This is your job - maybe your most important job.
Just as its your job to protect your personal health and safety. Nobody (and certainly not the state) is going to do that for you.
Is there something about the trajectory of evolution of the internet that suggests to you that this is incorrect?
I observe continually (seemingly perpetually) increasing traffic, and continually (seemingly perpetually) increasing capacity for general purpose computing. I also observe enormous empathy and cyberpunk traditions in our communities, protecting each other. Do my eyes and ears deceive me?
Restraining orders are a thing for a reason. It's cheaper to harass someone out of business (intentionally or otherwise) than to compete on a level playing field.
Being a good neighbor requires restraining oneself and making requests with consideration for the other party.
Full disclosure: I worked for a price monitoring service that prided itself on crawling up to every 3 hours. Steps were always taken to mitigate the impact. Sometimes even asking hosts to allow-list the crawlers.
Sure, but for the purposes of this conversation, saying "for a reason" regarding a function which is presently delegated to the state is fraught with all sorts of future-proofing concerns.
It seems to me that, as a baseline, we have to agree to observe the apparent trend of the internet to supplant the state - to resist its censorship and influence almost entirely - as an indicator that our long-term thinking needs to put those relatively few state functions which are essential to a peaceful society (such as restraining orders) in the purview of the internet... somehow. Maybe that will prove to be unnecessary, but in the case that the state fades, we'll be happy we had the foresight.
Internet traffic is barely (and arguably, already not) under human control as it is. And in another century, it will almost certainly be impossible to tell the machines 'enhance your calm or else'. Or else what?
I agree wholeheartedly about your qualities of good neighbor roles. But I don't think they extrapolate the way you think they do.
Consider this: at every moment, your house - your literal dwelling - is bombarded with high-level, semantic radio traffic, from way down where the messages bounce off the ionosphere all the way up to 10GHz and beyond. But this doesn't bother you. You ignore what you don't need! You draw boundaries and personally work on strengthening them - with the help of your friends and neighbors.
The internet needs help taking this shape at the application layer (and really, at all layers). And that part is up to us. We can't just throw our hands up and say "<legacy state function> exists for some reason, doesn't it?"
The government is our tool for regulating society when self regulation fails. It may be a blunt instrument and a last resort. Yet there is a place for it. We cannot entirely outsource all boundaries to individuals and private institutions.
I agree it would be ideal if the Internet could be as opt-in and benign as you suggest. Though I'm not even sure such an architecture is possible. How do you drive down the cost of listening and filtering to near zero whilst still allowing the desired signal?
And even if it were possible, consider that we do rely on governments to regulate the limited radio spectrum that we all have to share. Otherwise it wouldn't be an option to opt in to. The signal would be drown out by whomever has the strongest transmitters.
> The government is our tool for regulating society when self regulation fails. It may be a blunt instrument and a last resort. Yet there is a place for it. We cannot entirely outsource all boundaries to individuals and private institutions.
I don't know who "our" refers to here, but if humans are evolving into "the internet", or however you want to think of this creature which is emerging over the course of this century (and appears wont to accelerate over the next few centuries), then I don't think the state is "ours". We can't just cover our eyes when presented with the proclivity of the internet not to tolerate the state.
> I agree it would be ideal if the Internet could be as opt-in and benign as you suggest. Though I'm not even sure such an architecture is possible. How do you drive down the cost of listening and filtering to near zero whilst still allowing the desired signal?
Cryptography.
> And even if it were possible, consider that we do rely on governments to regulate the limited radio spectrum that we all have to share. Otherwise it wouldn't be an option to opt in to. The signal would be drown out by whomever has the strongest transmitters.
...really? Do you really believe that the state is a force for coordination and openness in radio?
The only bands which reliably continue to have these characteristics are the amateur bands, which have been defended by users for decades against constant encroachment by a state which, if it had its druthers, would've sold these bands to AT&T a long time ago.
My sense is that, if the government thought we weren't watching, they'd simply cancel the amateur radio license program. It is people standing to be counted (by taking the test) that keeps these bands viable _despite_ the FCC, not the other way around.
There are certain tasks that you would never do yourself, such as surgery. And there are certain tasks like changing your oil where anyone with patience and diligence can do it themselves. It's just a question of whether you want to spend the time to learn it and do it.
Responding to a C&D letter from a Fortune 50 company, I would posit, is more like performing surgery than changing your oil. The cost of being wrong is rather high.
The weird bit is when doing it yourself turns out to be more of a hassle and more expensive than paying someone else to do it. Around 15 years ago I decided to learn how to change my own oil. Even after excluding the fixed costs (I bought little ramp things to drive the front of the car up on while I worked underneath, and a container to drain the old oil into), I was surprised at the per-change costs: the cost of the oil itself (and the new filter), as well as the cost to properly dispose of the old oil. Ended up being more expensive than just taking the car to Jiffy Lube and leaving it with them for an hour or so.
That was the first and last time I ever changed my own oil.
I've had shops do all of the following (not at the same time but each has happened before I stopped letting them change my oil):
- fill with the wrong weight oil
- not change the filter
- not tighten the new filter adequately, resulting in leaks
- install a very low quality "no-name" filter
- overfill the oil
- overtighten/strip threads on the drain plug.
- leave tools under the hood.
And that's just oil changes, one of the simplest things a shop can do. Maybe it's because they put their least skilled people on it, but it doesn't incline me to trust them for anything else.
Feel ya. Disposal is a pain, and if you mess up, it's a trip to home Depot to get some chemicals to clean your asphalt. That was fun when my apartment had me parking in a shared garage...
Oil is simple and easy enough that I just get it changed with my inspections. There are things that, even if you're competent enough to monitor and do yourself, is still better getting a second pair of eyes on. That said I wouldn't do jiffy lube or other stop and go oil shops... Too many noobs there where the chance of them effing it up is higher than myself. I once had a tire buldge when I was younger and broke AF, they replaced the wrong tire and I had to drive back to convince them they changed the wrong one (big old bubble in the sidewall), took a bit to convince them they changed the wrong one since they refused to admit fault. Thank God I took a picture before that was clear enough to place the bulb right on the text in the exact same spot.
I'm having similar concerns around my diy for some electrical and gas work. Yeah technically I can do it myself to code, but I'd rather inspect someone else's work and not deal with the liability of fucking it up myself. Just because I can do it doesn't mean I can do it to the level of a quality professional, and I'm now wealthy enough to actually get the pros and not just the journeymen. There's something about paying for quality work that just feels good. So long as you can respect the labor, it feels great and not so weird to hire others.
That said, I've had a few coding projects I've subcontracted in my home due to lack of time to those on roughly equal grounds as myself. It feels a bit weird, especially for tasks with unknown bounds but worth it for the time and schedule savings. I'd rather not wait another 6 months and spend my personal time when I have a laid off friend who just wants some bar cash.
Though I've generally been disappointed with the legal services I've hired. Law and medicine seems like most professions, there are some really good practitioners and a lot who are mediocre but have passed the minimum required qualifications, and it's hard for an outsider to immediately spot the difference.
Speaking of surgery, here's an analogy that might be helpful.
Five years ago I had a catastrophic ankle injury I suffered while running in Moab. Two broken bones, lots of torn ligaments, and otherwise irreparable damage without serious surgery.
I interviewed a whole bunch of surgeons before I decided where to go under the knife. And I don't remember where I got the advice, but someone told me the most important question to ask is: "How many times have you performed this specific surgery (a Maisonneuve fracture repair)?"
I eventually found the Steadman clinic and a doctor who had already performed the exact surgery I needed nearly 100 times. Everyone else's answer was less than 5. Some even answered 0. The surgical clinic I used had signed pictures of professional athletes all over the wall. I found the true specialist, and I'm very thankful that I did.
Even bad lawyers and surgeons are expensive. When you have a bet-the-business legal issue, do plenty of advanced interviewing to make sure that the one you hire has plenty of experience with the exact issue you need help with. If it's not obvious that you've found the right person, keep looking.
> Law and medicine seems like most professions, there are some really good practitioners and a lot who are mediocre
This is accurate, in my experience. It's what makes initially finding a lawyer (or doctor, or therapist, or auto mechanic, or etc.) a painful experience. You have to expect to go through a few before you find one that works for you.
Then, when you find one, treasure them for the pearls that they are.
It is worth pointing out that FB has a long history of litigating this issue, from Power Ventures, to BrandTotal, to Octoparse, to Voyager Labs and more. And they have about 80-90% track record of success. Obviously, they send C&Ds more often than they file litigation. But to act as if this is a completely idle threat is naive.
The problem with this advice is that this is a very niche area of law. Unless the people you know have had prior experiences with data-access/web-scraping legal issues, a generalist recommendation is very unlikely to be helpful here.
> If you don’t know anyone that would be in the area of law that you’re looking for, ask for _any_ attorney recommendations, then ask those attorneys for recommendations for people in the area of law you need.
Attorneys know attorneys. I’d still recommend starting with your network, then asking those attorneys who they would recommend for the services you need. Or ask them if they know anyone that might be able to refer you.
There are probably two dozen specialists on this issue nationwide. A properly targeted Google search will outperform your personal network of attorneys (and their network of attorneys) 99.9% of the time.
Your assertion is that there are <= 24 lawyers, in the entire United States, that are qualified to handle a hobbyist software developer receiving a C&D?
I’m sorry, that just doesn’t sound at all credible to me.
It almost cannot be accurate by definition. There is no legal service that a hobbyist could _ever_ afford if there are <= 24 qualified specialists in the United States.
As an attorney who has experience responding to Meta’s “anti-scraping team,” I think there might be more opportunities for amicable resolutions than you might expect (depending on the specifics of what you’re doing, of course). Meta is not oblivious to the fact that they’re under significant social and regulatory scrutiny. They sometimes play nice if you’re willing to accommodate certain considerations.
Either way, my recommendation would be to find an attorney with industry-specific expertise to address the norms of your industry. C&Ds range from idle shake downs to definite pre-cursors to litigation. Without industry-specific knowledge, it’s hard to know which is which.
Is there existing case law around browser extensions that only alter the presentation of a web page on the client machine? You know, things like adblockers or extensions that alter a specific site?
Would you be willing to share some stories regarding particularly FB reacting to someone scraping their data? Are they very stingy? Would they bother with someone non-US based?
I can't share client-specific stories because that's protected by AC privilege. But I think the recipients of these letters sometimes have more potential to negotiate than they realize.
No, it is not. If you do not have a fiduciary relationship with Boeing and you have no confidentiality obligations with respect to the information, you are not trading on inside information. If you're in the plane when the door blows up, you're just the first person with material public information. You're not trading on material non-public information.
Important clarification: you do not need to have confidentiality obligations with respect to the information or a fiduciary relationship, it need only be information that is material and non-public information that belongs to the company (i.e. only available to those with a fiduciary responsibility or confidentiality obligation to the company). If an insider with confidentiality obligations shares material non-public information with a person who has no confidentiality obligation, and that person trades on that information, that would be insider trading.
The link you referenced also clarifies this point, but it is different from what is written in your comment.
Note: this doesn't change the fact that the answer in this particular case is no, it's not insider trading. You are, as parent mentioned, just the first to know the news.
That’s not quite correct, it depends on the nature of the disclosure.
Someone receiving information from an insider needs be independent of personal, financial, and quid pro quo relationships. So a random person that happens to sit next to a CEO on an airplane can trade on whatever they hear. The CEO’s mistress sitting on the other side of them can’t.
This exact scenario happened to me. I was flying United business class SFO to EWR and the guy next to me was writing a Powerpoint slide in 9000-point bold type "BUY XYZ CORP FOR 880 MILLION" and when I got to work a few hours later our counsel advised me that it was not at all improper to trade on that information, which we did.
Well, I’ve figured out how I’m spending my spring break- buy a ton of cheap stock in some random startup, dress head-to-toe in Microsoft swag, and then spend a few days hanging out in various SFO lounges working on fake PowerPoints declaring intent to buy the startup
Seems good. But I also feel like if you're the kind of person who can command the disposition of a billion dollars, just stop writing slides. Stand up in front of the board and say what you came to say and then sit back down.
> So a random person that happens to sit next to a CEO on an airplane can trade on whatever they hear.
I am under the impression that this would also be illegal, because trading on the basis of MNPI is itself illegal, irrespective of insider/outsider status.
Overhearing could fall under the "misappropriation theory" of insider trading. If you run into "confidential" (material non-public) information about the security, you still would be committing fraud. [1]
But then the passenger could claim that they did not the person next to them was Elon Musk, and that when Elon said over the phone "whoever shorts Tesla stock now will become a billionaire next month" they thought it was some random guy giving his 2c on the trade.
> Before U.S. v. O’Hagan, 521 U.S. 642 (1997), individuals could only be liable for insider trading under the classical theory of insider trading. In U.S. v. O’Hagan, the U.S. Supreme Court faced a scenario where a partner at a large law firm purchased stock futures in a company conducting a tender offer based on inside information that he gleaned from other partners at the firm working on the deal. Although the partner had no fiduciary duty to the companies in whose stock he traded, the Supreme Court found him liable under Rule 10 b-5 on the grounds that he used confidential information to trade securities. The Court reasoned that such insider trading is fraudulent because it is akin to embezzlement; that is, the owner of the confidential information has exclusive use of such information, and the trader misappropriates that information by trading on it and not disclosing the use of the information to the owner of the information.
But how does this square with rumors? Is trading based on rumors illegal then?
"I heard a rumour that their defect rate is very high for this new product."
Information that isn't meant to be public might still send up circulating sure to mistakes etc. How would you determine whether trading based on it would be legal or not?
This has nothing to do with ignorance of the law, it's about intent.
You can be fully versed in insider trading law, receive some information that you reasonably assume isn't protected, trade on it, and that's not insider trading.
If that weren't the case, every single person who traded a stock after some MNPI was inadvertently broadcast/published would be guilty of insider trading.
> The principle is that it is illegal to trade on the basis of market-sensitive information that is not generally known. This is a much broader scope than under U.S. law. The key differences from U.S. law are that no relationship to either the issuer of the security or the tipster is required; all that is required is that the guilty party traded (or caused trading) whilst having inside information
Agreed. It absolutely could be if it’s technically non-public information. That’s the entire point of the regulations. Just because you don’t work for the company doesn’t make it not insider trading if you act off information the company didn’t disclose.
> it need only be information that is material and non-public.
I think this is wrong as well. Suppose you are a independent technician repairing cars. Over time you notice, that, say BMW car quality used to be good but has gone to shit. That's not public information, but you would be allowed to short BMW stock in the hopes that, once public catches on, their share price will tank.
In fact half the point of stock trading if for you to do research, including your own investigation and testing. And then use that as an advantage. In the process you are bringing the price close to it's true value.
The gp's wording is a little confusing but he's just trying to explain the transitive logic of non-public information transferring from a "true insider" to an outsider is also "insider trading" and thus illegal. Think of it as the provenance of information coming from an insider.
E.g. Martha Stewart is an "outsider" and not an insider of drug company ImClone but she was found guilty of insider trading because she did get confidential information from insiders at the Merrill Lynch brokerage that handled stock trades for the ImClone CEO: https://www.sec.gov/news/press/2003-69.htm
Your scenario of a mechanic repairing cars, or somebody counting the number of cars in various Walmart parking lots, or a hacker that discovers a serious website vulnerability that may cause embarrassment and stock price drop ... none of those situations have a corporate insider in that information disclosure loop.
I can't find any evidence that she was ever charged with insider trading.
The judge dismissed a charge of "securities fraud", which claimed that she had defrauded investors in her own company by making false statements to the public.
The jury convicted her of "false statements", obstruction, and conspiracy.
Slightly clarified my comment via a parenthetical. "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization.
I was trying to avoid the use of "insider," because people tend to assume that means employees or directors, but that is not the case. Outside organizations who have, as an example, signed an NDA with the organization may learn of material non-public information, and trading on that could constitute insider trading.
> "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization.
Right, but information available to those with a confidentiality obligation can still be traded on if acquired legally. That's the crucial point. It's not enough for it to be non-public and material, you must also be in breach of a fiduciary duty (or acting in concert with somebody who is). For example, if a Boeing CEO was at a coffee shop discussing an upcoming acquisition at the table next to you, you'd be able to trade on it, even though it was confidential information not available to the general public and obviously material to Boeing's stock price.
It's not required – to my knowledge – that specific person disclosing the information be in breach of a fiduciary duty, as one could easily overcome that by disclosing to someone who discloses it to someone else, who then trades on it.
The scenario you mentioned is generally understood to be permissible, but it's not exactly clear to me why. Perhaps that the information became "public" (whether intentional or not) when discussing it in a public forum such as a coffee shop?
> If she put it on twitter could she legally trade on the tip?
IANAL, but if she traded a picosecond after tweeting: no. If she has zillions of followers and traded a year later: yes, because ’the public’ could be aware of the content of the tweet. A judge will have to decide on in-betweens. When doing that they likely will take into account how open Twitter/X is.
> If I saw the tweet and trade is that legal?
Again, IANAL, but I would think so, if she has ‘enough’ followers.
"Public" doesn't mean the company has publicly announced it - just that the information is available to the public. The situation you're describing is very similar to the Boeing situation above. You just happen to be the first person aware of the news, because your job provides you the ability to see a bunch of cars and understand how their quality is trending. Nor is it any different than you buying, say, one of the first Rivans, thinking the QC was horrible, and shorting the stock.
Regardless of when you learned it, the quality of BMW's cars (in this example) became public information when they started selling them to the public.
Now, however, if an internal employee told the technician that BMW had removed all QA checks from their line, and (s)he should expect quality to fall precipitously in the years ahead, that would be different.
Just because Car and Driver hasn't published an expose doesn't mean the information isn't public. Presumably lots of other independent (and non-independent) technicians have noticed the same thing. Your observation may be sampling error or not something that is sufficiently noteworthy to have percolated up to all the car forums out there en masse.
It's not insider trading to judge the quality of a product based on what you experience of the product in the wild and to make an investment decision accordingly. It's just being canny.
Now, if you learned from someone inside that they were going to do a recall but had not announced it yet, on the other hand...
That being said, I am sure that insider trading is widespread (e.g. above example). The thing is that is it not easy to detect unless you are already on the radar.
Seems to me the technician does have public information, he is not the only technician that has that data he might just be the only wise enough to notice the pattern
This is not insider information you got from the company. You just observed the world. Totally allowed. What would not be allowed is if you got hold of info from BMW that showed way more repairs than previously reported etc (and it was material for the company).
Anyone could have been on that plane provided they bought a ticket. The fact that nobody else was is irrelevant. The information was not only knowable to those with a fiduciary or confidentiality obligation to the company.
If you're traveling as a regular passenger, you still would not have a fiduciary relationship with Boeing and you have no confidentiality obligations regardless of who else is on the plane.
What does "non-public" mean here? If some information gets leaked without authorization by an insider (like when people leak stuff online...), (when) does that become public?
What if you infer it from a person that does have a privilege position.
Here’s the scenario. During acquisitions, acquiring company sometimes use market research companies to reach out to former execs at the company as part of their diligence.
Can you trade long if you just receive a bunch of requests from market research firms but never actually talk to the acquiring company?
If you infer it, rather than being told by the research company then it’s probably on the “not” end of the “insider trading” spectrum. The SEC could still charge you but it would be hard to prove how you inferred the information
There's an ongoing insider trading case where an executive at Company A learned that Company A by might acquired. He then bought call options on his closest competitor assuming that the news of Company A being acquired would cause the value of the competitor to also increase.
Depends on how well connected you are to the establishment whether a prosecutor would try to bring charges on more novel fact patterns. Rule by law vs rule of law and all that.
> If an insider with confidentiality obligations shares material non-public information with a person who has no confidentiality obligation, and that person trades on that information, that would be insider trading.
Is this transitive? If the person with no confidentiality tells a 3rd person and that 3rd person trades, is that still insider trading?
You're muddying the waters here, the original poster is correct, but with a few scenarios for outsiders. For example, a company that printed the financial statements of companies, had no NDAs, was trading on the data, and was convicted of insider trading because they knew the data was company confidential information.
Theft from the company is the central tenet, whether you are an insider, have a fiduciary responsibility, or an outsider who comes across data from inside the company.
Material nonpublic information that isn't taken from the company is fair game, thus all the quant funds that collect detailed market intelligence and trade on it (or the posted example, a passenger on the plane who knew the news ahead of the public). It doesnt matter one whit whether the information was material or public, it matters only that it wasn't taken from Boeing
EDIT: I was involved in the early days of a company that sold data to quant funds, and spent many hours with lawyers on exactly this question
> or an outsider who comes across data from inside the company
Doesn't it matter how you came across that data? If you were at a coffee shop and happened to overhear a bunch of Boeing engineers talking about how they were replacing bolts with hot melt glue I thought you could you trade on that. If they explicitly told you that they were replacing the bolts with hot melt glue, then you wouldn't be able to.
Unless you shad signed an NDA that stated they would not disclose non-public info and then told you about the glue, in which case you could still trade on it.
It does seem quite odd to say "it doesn't matter one whit whether the information was material or public" when insider trading is defined as: the trading of a company’s securities by individuals with access to confidential or material non-public information about the company.
Further, I struggle to understand how one could learn information which is non-public without "theft" of that information. It would seem that, by definition, if the organization begins sharing that information with individuals who have no confidentiality obligation, they have now made that information public.
What does tend to happen often is that others assume "public" means "written in the news" and that is certainly not the case. There are plenty of things that are knowable by the public but not obvious, and it's perfectly fine to trade on that.
> Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security.
My statement was copied from Cornell Law's definition [1].
But, yes, all of these shorthand definitions are designed for the general public's consumption, and skip over specific nuances - including the SEC's definition. The sentence read above would seem to permit a person with a fiduciary duty to share information with someone who does not have one, and for that person to trade based on the information. However, we know this is not permitted.
In any case, I think my comment still stands. I specifically called out in my parenthetical in the original comment that the information would need to be knowable only by those with a fiduciary or confidentiality obligation to the company. This seems to cover your comment and sibling's concern.
Example: logs of search queries that suddenly trend with adverse information about companies. Those logs are not public, in fact you need to buy them, but they have real signal (thus material and nonpublic), and are perfectly legal to buy and use. Satellite photos to estimate material stacking up outside a factory, or how many cars are in the parking lots of retail stores. Mobile data that has been statistically tied to foot traffic in stores. Credit card purchase data (not public! very material! perfectly ok!) I could go on forever
Go ask a lawyer this is a big space
EDIT: Yes exactly, ITS HAS TO BE CONFIDENTIAL TO THE COMPANY AND THUS TAKEN FROM THE COMPANY LIKE I SAID ABOVE. Your explanation implicated all the cases I described. You haven't seen how explicitly rich are the sources that I mentioned above, they are very very definitely information about the companies that are traded
My explanation did not implicate the cases you described above, because it explicitly said "only available to those with a fiduciary responsibility or confidentiality obligation to the company"
Regardless of the level of fidelity, if you got that information from an unaffiliated third party entity who captured it in the delivery of their own services, it is not "only available to those with a fiduciary responsibility or confidentiality obligation to the company"
It sounds like we are saying the same thing and you don't feel my original comment was clear enough. That's fine feedback. But there's no substantive disagreement. The points you listed above are all fine to trade on.
Better question can the flight attendant buy puts? What about the air traffic controller who handled the emergency? It’s the exact same information.
This is where insider trading rules just don’t make sense. Here’s a good example. You can buy credit card data from Bloomberg that will give you near accurate information on revenue. For earnings, you can pay to see if a company will meet expectations and trade off that information. If you work for the company, it’s insider trading. If you work for the credit card companies and get the same info and trade on it, it is also insider trading.
Maybe we should make insider trading, trading off information that isn’t public.
Why? Trading implies making stock trades based on non-public information. This has little to do with auditing and investigating, since that information is not necessarily public.
I once saw somebody say something to the effect that in every Hacker News thread, there is always a highly upvoted comment that sounds completely plausible, well argued, made by somebody who appears highly qualified to answer, and that is completely incorrect.
Unfortunately in this case the answer as written is completely wrong. See the top reply.
> If you do not have a fiduciary relationship with Boeing and you have no confidentiality obligations with respect to the information, you are not trading on inside information.
Specifically this part. One of the first things you learn when doing mandatory insider trading training is you can easily run afoul of the law if you act on non-public info you overheard, or happened to see by accident, even if it has to do with some company with which you are not affiliated. A common example is you’re in a coffee shop and see an upcoming earnings report on someone else’s laptop screen, then trade based on that information.
Delaware is definitely not the cheapest or even in contention for the cheapest.
Still, if you want to raise capital, the correct answer is DE C Corp. If you're not looking for external funding, any state will do. If you care about anonymity, do Nevada or Wyoming. If you don't care about anonymity, Colorado is actually a very good choice. Very simple, intuitive online filing system that accepts filings instantaneously. Filing fees as cheap as anywhere in the country. No need for an attorney (or LegalZoom or some other random service) unless you just don't feel like dealing with it.
Costs will likely be $50 to file, Registered Agent (as cheap as $30 per annum), and $10 periodic report fee annually every year you're in business. Colorado is even nice enough to send plenty of reminders on when to file that report if you give them an email address.
Since you're a US citizen, my instinct would be LLC taxed as an S corp. But confirm with your accountant!
If I'm a non-resident alien looking to incorporate the cheapest US-based company so that I can open a business bank account for credit card churning, would a Colorado LLC still be the the best choice for me?
You’ll need an SSN to open most credit cards, it’s very difficult to get a credit card without residency. The business banks that specifically cater to overseas founders (like Mercury) make banking easy but that doesn’t extend to churning credit cards.
Edit: put simply, it’s very unlikely that opening an LLC will help you in obtaining credit cards as a non-resident.
I assume ”non-resident” in this context means not a permanent resident, but still a SSN-holding resident otherwise. For example a TN or H1-B visa.
These visas don’t authorize you to work for a company other than the one officially sponsoring the visa, but you are allowed to own your own business. Perhaps that is the motivation for wanting to open an LLC, but I’m not sure what an LLC gets you in this situation that simply declaring yourself a sole proprietor doesn’t.
No, you are totally wrong. You should not comment on things that you have no understanding of. A non-resident alien is any person in the US who is not a citizen, green card holder, or passes the substantial presence test. There are millions of non-resident aliens on visas in the US.
Substantial presence test is applied by IRS only for tax residency. You can be on h1-b for 5 years, pass the SPT and classify as tax resident but still be non-resident alien in the eyes of DHS/USCIS/SSA.
In the United States, non-resident alien is someone who does not have a LPR or US citizenship. Students on F1 Visas and J1 visas for example, are categorized as Nonresident aliens.
H1B is a dual purpose visa on the other hand. LPRs and Citizens are obviously categorized as residents.
It's just industry standard for capital raises. All corporate attorneys learn DE law when they go to law school and are expected to know it if they practice corporate law. A Colorado attorney doesn't know California law and a California attorney doesn't know New York law, but if they do corporate legal work, they're all expected to know how to deal with DE law.
Nobody knows Nevada or Wyoming law. I don't even think Wyoming attorneys know Wyoming law.
DE's court of chancery is also very sophisticated with respect to corporate legal issues. That makes it the venue of choice for investors, which means it has become the venue of choice for those seeking investment.
But in terms of states and their processes for filings, DE is a total pain in the butt. You have to pay an expedited filing fee just so that they can process your filing in less than a week. Their system is counterintuitive and clunky. You better like elevator music if you ever want to talk to a human. Sometimes they reject filings and just don't bother to tell you. It's all opaque and antiquated.
I would also add from a founders standpoint - the infrastructure Delaware has supporting their business incorporations division has been miles above any other state I have worked with. They pick up the phone when you call! The files and forms are (relatively) easy to find. Supporting firms like registration agents are plentiful and straightforward for Delaware.
I'm a longtime Delawarean and in my past life as a journalist I wrote about why the state is such a corporate haven.
The short answer is that companies incorporate in Delaware to mitigate risk.
The slightly longer answer is that the Delaware courts that deal with corporate legal matters are much more predictable than comparable states. There is voluminous settled case law, and so when you incorporate in Delaware, it is a safe option, a known quantity, relative to other states.
That's why VCs and other investors want the company to be incorporated in Delaware. It's not just because everybody else is doing it; it's to mitigate legal risk.
When we look at consumer products, we sometimes consider the total cost of ownership. Maybe a pair of sneakers is not the cheapest, but it lasts longer than a budget pair, so it has a lower cost of ownership over the lifetime of the product. Delaware might not be the cheapest state to incorporate in, but it has the legal equivalent of a low cost of ownership over the life of the business.
I mean it is because everyone else is doing it. Because everyone else incorporated in Delaware, that's where the case law is well established, all existing contracts are written in terms of DE corporate case law, etc. etc.
We all could have picked Road Island or New York instead. But for historical reasons it was Delaware.
Yes, that's correct. Companies originally flocked to Delaware because it was relatively easy to incorporate there, and then the volume of registrations begat the volume of case law, which begat more registrations because of the favorable legal environment.
My point was that it's not just because it's trendy or a matter of conformity. It is a risk-management strategy.
Everyone hates Facebook but everyone uses it. Why? That's where the people are. Same for Instagram, Reddit, etc.
Everyone hates JavaScript. Buggy and counter intuitive. Mess in all the different browsers - historically. But everyone uses it because everyone uses it so it gets the community.
Maybe Delaware is the best... or a victim of circumstance. Or being good enough and one of the early states to get that foot hold.
Not an attorney, but as someone with a startup incorporated in DE—it's just the default. Delaware has very good and well-understood corporate law and a judicial system that is able to handle complex corporate cases.
If you're fundraising as a Delaware C Corp you will face no questions about that, but if you've done something else you will need to explain why to your potential investors (and they will probably push you to reincorporate).
Delaware Court of Chancery also holds the doctrine of shareholder supremacy, where execs actually have an obligation to maximize shareholder interests. Other states don't recognize it or allow balancing other stakeholder priorities.
There are limitations on the number of owners and the amounts and type of stock you can issue as other types of corporations. Delaware doesn't require you to disclose all owners and investors and they have a court of chancery that is business friendly.
Some states are better than others. For example, California has an annual LLC tax of $800. There's no reason to pick California for a use case like this.
If your corporation will be deemed to operate in the state you live in, which it might, then it'll need to register there as well as its home state. The least hassle path is often to make the corporate home the same as your home, then you don't have to register in two different states, and you don't need to pay a registered agent, because you can do that, etc.
It's certainly a different question if you're likely to get funding, but it's not hard for a skilled attorney to re-incorporate your business as a Delaware corp if that's a condition of financing, just takes a bit of time to do the work, and maybe not much more time than incorporating in Delaware to begin with, and delaying hassle that you might be able to avoid is better than paying it upfront.
I agree with the first paragraph and strongly disagree with the second. If you are a US citizen and live in the US, for any pass-through entity, you will likely be taxed and need to register as a foreign entity in your home state. Probably easiest to just incorporate where you reside, unless you're looking to raise capital, in which case you should just go straight to DE.
Conversion costs and/or re-incorporation complexity varies considerably by state. Some states allow for simple statutory conversion; other states expressly prohibit it. It is not accurate to to say that reincorporating is just a bit of work. Sometimes it is, and sometimes it's a lot of work. If you're serious about raising capital, start as a DE C Corp from the gun. Especially if you have multiple founders.
Your commentary on the wide variety of challenges that can arise from reincorporating/re-domiciling matches my experience.
In some cases, depending on the originating state and business structure, there may not even be a way to accomplish that without selling your old business to your new business. Even if that’s “just on paper”, it becomes an entirely different (and sometimes much more costly) beast.
Texas has a larger up-front cost (about $300 one-time), but no annual fees at all, no income tax for corporations or individuals.
Unlike Wyoming and Nevada, Texas does have franchise tax, but that is 0 until you exceed $1.23M in revenue, and it maxes out at .331% or .75% after that (https://comptroller.texas.gov/taxes/franchise/).
Delaware has all of these (personal, which wouldn't apply if you live elsewhere, corporate income tax, corporate franchise tax, minimum $400 annually). Wyoming costs only $50 to incorporate but has a $50 annual filing fee.
Also, you'll probably need to file foreign corporate status if you have employees in Texas but are incorporated elsewhere, which is about $700 (one-time).
What happens if you move your home to a different state after incorporation? Do you potentially have to register the business in the new state as well as the old one it's already registered in?
How difficult is it to change, in practice? If I've got an LLC or a corp in a different state, can I form a DE C corp and arrange to have that buy my whatever?
I wrote an article about that last fall that got some attention here.
https://news.ycombinator.com/item?id=37264676