Heinz and the Perfect Insider Trading Scheme — CNBC

As you already know, the Securities and Exchange Commission has obtained a court order freezing an account that holds thousands of call options on Heinz shares that were purchased the day before the deal was announced. The FBI has said it is talking to the SEC about the trades. Someone might go to jail before this is all over.

Notice that what got the attention of the SEC and the FBI was a highly unusual and highly profitable options purchase. As far as anyone knows, neither agency has any evidence of wrong-doing apart from the timing of the trade. No evidence of stolen documents. No taped conversations tipping off traders about the deal. Nothing but the trade. The lesson here is that if you want to use material nonpublic information obtained in breach of a fiduciary duty to achieve abnormal returns, you shouldn’t do it by trading. You should do it by not trading.

via Heinz and the Perfect Insider Trading Scheme — CNBC