Twitter Stock Manipulation

I thought I would pose this hypothetical and see what people thought. Suppose the President took a short position in a stock. He then begins issuing a series of tweets attacking that company. The share prices fall and the President covers his short.

Is there any violation of law here?

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5 Responses

  1. Phil says:

    To the extent his tweets move the stock price, they constitute material information about the company. Since his intent to do this is presumably not announced in advance, the fact he will disparage the company is non-public information. If he makes money on the scheme, it sure looks like the primary elements of insider trading are met.

    • Brett Bellmore says:

      If one assumes that knowing what you yourself are going to do is inside information. Which, unless you’re an officer of the company yourself, it is not. “Non-public” and “inside” information not being the same thing.

      • Phil says:

        I agree in this case Trump is not an insider if you define an insider as company officer or director, but that is not the requirement under U.S. securities law. Anyone – inside or outside the boundaries of the firm – who makes illicit gains by manipulating securities trading is guilty. Read Rule 10B-5. It applies to “any person.” https://www.law.cornell.edu/cfr/text/17/240.10b-5

        • Brett Bellmore says:

          The law you cite requires false or misleading statements. Not statements which merely effect somebody’s opinion.

          Trump is certainly “any person”, but having read the Washington Post myself, I’d be hard put to characterize his complaints as being so off base as to be fraudulent.

          That said, the important part of the hypothetical is the shorting the stock part. Without that, you’ve got no case no matter what Trump says.

  2. Joe says:

    Okay. Found the author’s latest at the library.

    Still not convinced about the “Bill of Rights” label [I provided details in past comments] though there is some evidence that the term did have a specific meaning in 1791 that would color its usage some (still, e.g., Jefferson talked to Madison about it beforehand & used just the usage as modernly understood). The changing understanding is a helpful discussion though it’s a small book so is not comprehensive.

    Two of his fellow bloggers at Balkanization have blurbs on the back of the book, but would wonder how various people who have written about the Bill of Rights, including who never suggested (having at hand the same basic material; modern computer research helps here but some of these people had that available too) part of his thesis, would respond in a long form.