One cliche thrown around is that tipping a golf buddy to material non-public information is an insider trading violation. The Securities and Exchange Commission just filed a case that proved that cliche true.
Eric McPhail learned the expected earnings and major pending corporate developments at American Superconductor through a friend who is (was?) an executive at that company. They were good friends and golfed together at the same country club. Confidentiality was expected.
However, Mr. McPhail took that information and tipped it to six of his other golfing buddies. At least according to the SEC complaint. Four of the golfing buddies consented to judgement, returned their trading profits, and paid fines.
Mr. McPhail is not accused of trading in the stock. He is charged with illegal tipping.
Unfortunately for the golfing buddies, their communication about the stock was not limited to the golf course. The SEC complaint is full of email messages discussing the stock and material non-public information. In one email, Mr. McPhail hopes to be paid back by his golfing buddies with pinot noir and steak.
The American Superconductor executive is not named in the complaint.
Sources:
- SEC complaint against Eric McPhail
- SEC Charges Group of Amateur Golfers in Insider Trading Ring
- SEC Charges Group of Amateur Golfers in Insider Trading Ring
- SEC Protects Integrity of Markets, Also Golf by Matt Levine for Bloomberg