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?
Reader Comments (Page 1 of 1)
7-25-2008 @ 4:07PM
DOC said...
Actually I believe the AMA ethics code does have something to say about this. In addition, I do know that a psychologist who trades on information from a session with a patient is liable. There have been criminal charges from such activities.
7-25-2008 @ 4:11PM
Beltway Greg said...
Zac, congratulations a new low in Blogging Stocks stupidity.
7-25-2008 @ 7:02PM
The Voice of Reason said...
Who cares... If Steve kills over and dies tomorrow I'm still buying my iphone next month as soon as my contract is upgrade eligible. I'm sure millions of others share my view. We are going to buy songs and apps through iTunes and app store. Apple is going to continue to make tons of money. And, everyone who wants to sit around speculating about a man's health can continue to do so, and continue writing these pathetic blogs that no one cares about. Maybe someone can write an equally appealing blog about whether the death of Steve's family dog will send him into a state of depression thereby sending Apple shares spiraling down. Then we can write another blog about whether or not the vet who knew the dog was going to die ran out and sold his shares before the news... please, kill me now if I have to hear one more word.
7-25-2008 @ 7:04PM
The Voice of Reason said...
Who cares... If Steve kills over and dies tomorrow I'm still buying my iphone next month as soon as my contract is upgrade eligible. I'm sure millions of others share my view. We are going to buy songs and apps through iTunes and app store. Apple is going to continue to make tons of money. And, everyone who wants to sit around speculating about a man's health can continue to do so, and continue writing these pathetic blogs that no one cares about. Maybe someone can write an equally appealing blog about whether the death of Steve's family dog will send him into a state of depression thereby sending Apple shares spiraling down. Then we can write another blog about whether or not the vet who knew the dog was going to die ran out and sold his shares before the news... please, kill me now if I have to hear one more word.
7-25-2008 @ 8:30PM
John Melikian said...
When is this Company going to split three for one so the lower price will get more people in a lower bracket to but stock / and when will you start paying a good dividend to reduce some of the cash on hand ?????
7-25-2008 @ 9:44PM
maddend4022 said...
What's this about his dog?
And the athletes foot?
He should delegate, and it should be visible to the outside world.
Maybe the Sculley years are still clear in his memory.
7-25-2008 @ 10:14PM
mike said...
i have a question why does he not have a bluetooth device???
7-26-2008 @ 8:37AM
Uncle Meat said...
While the hysteria over Apple has been just one more symptom of the bear market, it does seem to me that if you think the quality of management is a relevant factor when deciding whether to buy, hold or sell a stock, then the health of the CEO (or any other key player) matters.
As for the doctor, Jobs' medical information is protected by both State and Federal law. For his physician to use such information for a securities transaction may not violate the insider trading rule but would put the doctor at risk for civil and criminal penalties; to say nothing of possibly having his or her license revoked. Generally, a physician may use a patient's medical information only for diagnosis and treatment and to get paid. Which means the doctor may disclose the information to other health care providers and to a health insurer but not for personal profit.
7-27-2008 @ 4:02PM
Neil Anderson said...
Apparently money can't buy the great one more hair or a shave. :)
7-28-2008 @ 10:32AM
george scandalis said...
Zac,
We are all just a bit less intelligent for having read your blog this morning.
You truly are an idiot and not even a savant, just an idiot.