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Is Steve Jobs' doctor an insider?

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Shares of Apple, Inc. (NASDAQ: AAPL) were affected not to long ago by reports that founder, chairman and CEO Steve Jobs is cancer-free. Of course, that's good news for Apple shareholders but it got me to thinking -- just as a hypothetical matter -- is Mr. Jobs' medical status nonpublic information?

Suppose that his doctor had conducted an examination and found Mr. Jobs to be in tip-top shape -- if he goes out and buys call options before the news reaches the media, is that insider trading? I'm not sure. It seems unethical on a multitude of levels, but it isn't related to the company in a direct, material way like news about an upcoming merger would be. Just to be clear: I'm speaking hypothetically and have no reason to believe anything like this happened.

Similarly, could the SEC go after a doctor who, after determining that a legendary CEO had six months to live, bought put options set to expire on the approximate day of the CEO's death? I know this is morbid, but the law appears to be ambiguous on this matter.


Here's the thing: companies are not required to report on the health of their executives in their 10-Ks or proxy statements, nor are they required to provide shareholders with updates on medical issues with 8-Ks. By that standard, the health of the CEO is not material and, if it isn't material, trading based on advance knowledge of it is not insider trading.

Stuart Meissner, a securities lawyer, doesn't think a doctor could get in trouble for trading based on patient records: "In my opinion such would not be material inside corporate information -- it's similar to someone who notices that many Apple employees were suddenly driving brand new Lamborghinis indicating that that they were doing well and trading on that info."

But it still seems wrong, doesn't it?

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Last updated: July 06, 2009: 08:44 AM

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