Insider trading is a tough one to prove in court. First they have to prove you bought or sold shares. Since most people who do it have some sort of cutout to cover their behinds, it's difficult.
Next, they have to prove you bought or sold based on inside info. Unless someone confesses (as happened to Martha Stewart) it's again tough to prove.
Mike, essentially it depends on the source of the information you used to buy or sell the shares. If you're like most of us, you have very little access to inside information. If you can point to a specific article in a newspaper or a specific story on the TV news that motivated your buy or sell, you should be OK.
BTW, if Martha had just fessed up right away, she probably would have got off with a fine and probation.
There is a twist in this with regard to the actual original question.
"
If an investor starts to seek information about a company whose shares he is interested in buying is there some point where he should not seek any more information.".
The answer depends not only on from whom or from where you seek and or get your info, but it also depends on what
you know, or by exclusion, what
you don't know.
It is certainly reasonable to gather any available information during consideration of investment decisions.
In fact, in many circumstances, there is a fiduciary responsibility to do so to every extent possible within the law.
Oddly enough, this is actually one circumstance where "ignorance" could actually be a defense.
If you're gathering info, and you find it, but either cannot be proven to know the source, or if you know the source you cannot be proven to know the source is "inside", you would be not guilty under the statutes as I read them.
Interestingly, there is some legal precedence in this area.
I forget the case, but it may well have actual real world application to the Bernie Madoff case, although not directly related to insider knowledge, it is indirectly related.
There was another set of law suits regarding another investment Ponzi scheme.
Under the law, damaged parties could actually fight against each other if it can be shown that one party actually received money redemptions (supposed return on investment or actual withdrawal) before the scheme came to light.
The supreme court (I can't remember if it was the state or federal level) ruled that if it could be shown that an investor who received redemptions also had knowledge of, or concern of something being illegitimate with the investment, damaged parties could "claw" that redemption back into the pool of assets for distribution amongst all damaged parties. However, if it could NOT be shown the redeeming party had any knowledge of it, or any concern if it, the redeemed funds could NOT be clawed back into the pool.
Essentially showing that ignorance was, in that case, a defense.
This is indirectly related to your question in that while it does not specifically address stock transactions proper, it does address "
what inside info you know" and "
when you knew it was inside info" and to an extent
from whom you learned it .
So I believe the answer to your question is multi tiered:
1. You should learn all the info you can about investments including inside info if available
2. You should know if the info is inside, or exert reasonable efforts to ascertain this status
3. If you have information, or believe you may have information which could remotely qualify as insider info, you should act accordingly with regard to the laws.
I believe we need to start getting honorable in our world.
Just because a prosecutor may not be able to prove in court that we did a thing does not mean we did not do it.
Greed is NOT good as it is so cited in this movie.
We should not be living our individual lives based on what a prosecutor can prove.
Insider trading is wrong and it matters not if you don't get caught as to whether or not others are damaged.
Hopefully, this movie will soon be an anachronism.
