If the SEC pursues a civil case where the penalty is only fines and not prison, the standard need only be a "preponderance of evidence." It's much easier to prove that some of these executives probably knew about the news when they sold their shares.

With a lower standard for guilt, a greater number of innocent people will be fined by our government, for which we are ultimately responsible.

A greater number than are currently charged, sure, but a far smaller number in absolute terms causing a far larger amount of damage than the ordinary Americans for whom a criminal charge—which is made essentially entirely at the discretion of the DA—will remain on their records permanently, affecting their ability to travel and obtain jobs.

To zero out someone’s gains in this situation, as suggested by the parent poster in cases where no proof exists, would simply be a regulation to hold one financially responsible for his/her company’s actions. Guilt or innocence doesn’t have to come into play in that scenario.

Ostensibly the market already takes care of that in the form of stock price.

This entire thread is focused on the one situation where the stock price doesn't take care of it: When an employee sells their stock before a major price drop in a way that it's unclear if the employee knew about the reason behind the drop or not.

The article sates that he sold stock in anticipation of the price dropping and by doing so saved himself $117,000.00. The SEC believes this to be an illegal trade so now he is facing charges. If he had traded legally the market would have punished him for the company's failings.

In this situation everything seems to have worked correctly.

If you think the stock price should be lower take it up with your elected representatives and see what happens when regulations are put in place.

You're again missing the entire point of this conversation.

Yes, the evidence was clear in the case of the CIO, and everything worked as it should in the case of that one person. But as craigc noted, three other executives managed to sell shares before the price drop, so there's a question of how likely those three were to have known about the situation but by chance happened to have no clear evidence against them. That leads to the question of what can be done to more effectively prevent executives from engaging in insider trading in situations where they are aware that the evidence will be too scant to prosecute. One solution proposed was to zero the transactions of stock sales by executives that occurred shortly before an event like this. Saying "the stock price will take care of it" makes no sense in this context.

I don't think we can fix the lack of evidence by lowering the standard of proof.

If you wanted to advocate stronger reporting requirements for what executives knew and when then I'd be more comfortable.

But my point is that if we implement a policy to rollback but otherwise not punish executives who sell stock right before an event like this (notwithstanding any actual other crimes related to insider trading that could be prosecuted separately; for example tipping someone off), the standard of proof becomes irrelevant.

Personally, I think the solution is to not allow executives to sell stock without publishing a schedule in which the first sale is more than 9 months from the date of the announced schedule.

Not if they sold before, which is what this whole thing is about.

Yeah our civil court system fucking sucks.

Edit: I used to work in the legal industry nearly exclusively in civil court.

Can you elaborate? In what specific ways does it suck? Do you have any suggestions for improvement?

It's pretty easy to cover your tracks if you're not an idiot and know what you're doing, and I assume a lot of the people that make big insider trading plays are neither.

So hamstringing the SEC with an arbitrarily high standard just facilitates continued insider trading.

Agreed on the full burden of proof for penalties. But having your gains clawed back is a different fish entirely.

But having gains taken away is a penalty.

...

How does charging someone require "guilty beyond all reasonable doubt"? Sounds like a conflation between charging with a crime and convicting someone.

Aware he said "convict" but he probably meant "charge".

Imposition of any penalty is a conviction unless there is a voluntary plea. Charge is absolutely not what he meant, especially since that was a base he already explicitly covered.