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How SEC Mobile Phones Can Signal an Imminent Stock Price Drop 34

Mobile phone location data has linked site visits by US securities watchdogs to the headquarters of companies with measurable drops in their share prices -- even when no enforcement action is taken. From a report: When insiders sold shares right around a non-public visit by staff from the Securities and Exchange Commission, they avoided average losses of 4.9 per cent in the three months after the visit, according to a study led by researchers at four Midwestern universities. By matching commercially available data with share price moves, the study offers a window into the secretive world of securities enforcement beyond publicly announced cases. It also raises questions about the rules around insider trading.

"Maybe we should be thinking about what the rules are when the SEC shows up," said Marcus Painter, assistant professor of finance at Saint Louis University and one of the authors. The research used geolocation data to identify mobile phones that spent significant amounts of time at the SEC's various offices around the country. They then tracked those phones to corporate headquarters around the world in the 12-month period right before Covid-19 lockdowns led to extensive working from home.
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How SEC Mobile Phones Can Signal an Imminent Stock Price Drop

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  • by Brownstar ( 139242 ) on Friday September 13, 2024 @12:08AM (#64784517)

    From all my training, I’m pretty sure that’s already covered by law. It’s called material information.

    If you have that you can’t trade legally.

    • If the visit is secret and you aren't told about it but you happen to see an SEC agent you recognize getting out of their car, that's material information that nobody can prove you had.

      • If a random person sees something non-public (as in not in the newspapers, internet etc), just with his own eyes and nobody else saw, that is illegal to trade on?
        • No - they wouldn't count as a company insider. However if a company employee saw an SEC person inside their company in a way they could clearly deny (you are sitting at your desk, you look out the window, see them park and then walk inside; nobody saw you see that) then they could get away with it but it would be illegal. If they ever confessed to a friend later and someone got a recording of that confession then they could be charged.

          • But that's not want was just described in the summary.

            What is described is some clever person or group of persons tracked cellphone geolocation data on the SEC building. They then followed those devices around and if that device went to a company they had stock with, they sold.

            So no laws have been broken here. Just people buying location data that's legally being sold and then analyzing that data to decide whether or not to sell some stock. On average, this apparently saved them 4.9% or some such.

            Apparently

  • How can it not be a crime to track the location of public officials (and other people) with the intent to sell that information.
    • The advertising industry takes priority over all considerations of honest, people, the environment and definitely financial propriety. You can buy lists of phones in a particular area and then start to track them because the US does not have proper privacy laws.

    • They likely agreed to it in a EULA. The apps say your data will be harvested. This shouldn't be any surprise in 2024.

      At the same time, the lawsuit Katz-Lacabe, et al. v. Oracle America Inc (Case No. 3:22-cv-04792-RS) was just settled, although Oracle admits no wrongdoing.

      According to the class action lawsuit, Oracle tracked web activity, in-store purchases, geolocation and other personal information without consumer consent. The company allegedly sold this information to third parties for advertising use.

      https://katzprivacysettlement.... [katzprivac...lement.com]

    • You live in an oligarchy with only the bare minimum of comforts and protections to keep you from revolting while transferring most of your productive output value to the oligarchs.

      There's a good Princeton paper that covers this extensively.

      The Business Plot c. 1920's identified Mussolini, Hitler, and Roosevelt as the Three Fascists who could transform their societies from representative republics into oligarchies.

      They lost control but after WWII they set up the CIA to accomplish covertly their ends which we

    • How can it not be a crime to track the location of public officials

      How can it be? They work for us. We have the right to a whole lot of information about what they do. Unfortunately a lot of it isn't published by default when it should be, so you have to spend money on FOIA requests to get it.

      (and other people)

      Ah, there's the rub. That's because we don't collectively hold them responsible for allowing that. Too many people don't care.

      • So make they officials visits to business official and public. And stop selling personal device locations.
        • So make they officials visits to business official and public. And stop selling personal device locations.

          You can't check up on the first thing without having the second thing, because there are mylar bags in the world.

          • Maybe we need sweeping oversight reform? Have it be illegal for officials to conceal their location say in a mylar bag. Empower oversight committees to be able to oversee what officials are doing. Unchecked, how do we know there isn't corruption?
        • And stop selling personal device locations.

          Can't do that. First Amendment rights of AT&T, Verizon, etc. The data belongs to them*.

          *IIRC, in or around 1986 (in some telecom act) the ownership of call and location metadata was transferred from the customer to the service provider. AT&T actually took the case to court, arguing the other side of the case. And losing in the Supreme Court, I think. A common tactic in the legal biz. If you want to ensure your legal position, you argue the opposite in court, but with a mouth-breathing, knuckle-drag

    • by brunes69 ( 86786 ) <slashdot@[ ]rstead.org ['kei' in gap]> on Friday September 13, 2024 @09:39AM (#64785207)

      I know you didn't bother to read the paper (this is Slashdot after all!), so let me summarize

      The researchers had no proprietary access to information. All they had was publically available, anonymous cell phone location data. You can buy this data anywhere, it is the data used to build maps.

      What the researchers did is they just used data science to cluster this data by date and time and proximity to SEC buildings. If this phone is almost always in an SEC office from 9-5, then chances are it belongs to an SEC employee. They record that. Then later on, they see 4 different phones, all for SEC employees, all appear to go on a plane, and then show up at a given company HQ at the same time.

      What people should be taking away from this reseach is not just about SEC stock price.. it is about *how much information can actually be gleaned from supposedly anonymous cell phones.

      • anonymous cell phones.

        In this day and age, no one should think cell phones are "anonymous". They are being tracked by governments and the cell companies themselves. Their metadata is being sold to anyone that is willing to buy. At best cell phones are pseudonymous.

        • by brunes69 ( 86786 ) <slashdot@[ ]rstead.org ['kei' in gap]> on Friday September 13, 2024 @11:54AM (#64785599)

          The Metadata is anonymous. You can see where a given randomized IMEI was at a point in time, but you don't know who owns that randomized IMEI.

          The point I am making is that, you don't need to know the name who owns it to gain a lot of insights.

          As an example - if I can determine the house that a given device is residing at in the middle of the night, I can probably correlate that with other sources to know who owns that device, or at least narrow it to 2 or 3 people. I can then look at where that device ends up going to work to narrow it to 1.

          Data science makes anonymization impossible

      • What I gleaned is that what should be private data is for public sale when it shouldn't be. Stalking is stalking even if you don't know the name of the victim.
  • by VeryFluffyBunny ( 5037285 ) on Friday September 13, 2024 @03:45AM (#64784679)
    ...because financial services "regulation" is mostly nominal to give the public the sentiment of accountability. Every once in a while, they'll sacrifice someone by prosecuting them for some kind of fraud or insider trading to appease the masses. Some $billionaires also think it's an entertaining sport to try to take each other down in one way or another. Financial services is pretty much the wild west.
    • by JBMcB ( 73720 )

      ...because financial services "regulation" is mostly nominal to give the public the sentiment of accountability.

      I don't know about that. The SEC averages about one court filing a day. The most recent filing was against the CEO of FirstEnergy.

      https://www.sec.gov/enforcemen... [sec.gov]

      • Ah, do you mean the "fines" that they hand out that equal a small fraction of the profits the corporations have made from breaking the law?
  • by Anonymous Coward
  • Trade halts are ok if it is for the general good. Halting on the day of SEC visits removes unfair advantages. Don't like it? Then don't do things that draw the SEC to your company or don't invest in shady companies.
    • If the SEC is just paying a friendly visit with no action taken, 99% of the world won't know or care, and the stock (rightfully) won't be affected.

      If you put up a big public announcement "trading halted because of SEC activity", *everyone* will know about it and the stock will drop.

    • Sure. Because law enforcement agencies and their minions have never, ever, in the history of law enforcement, decided to liven up a slow or boring day by stopping, stalking, searching, questioning, detaining, arresting, or otherwise harassing, someone who did not, in fact, commit the crime they're claiming to enforce. We should just take their presence as a holy writ that the company they show up at is a criminal conspiracy; this time, the last time, next time, every time. That makes it so much simpler.

  • by rapjr ( 732628 ) on Friday September 13, 2024 @03:08PM (#64786075)
    This data has been available for purchase for a long time. Many companies collect it themselves. Have some of them been using it to inform their stock market activity over the last decade? Maybe that's one reason so many companies want to collect the data in the first place? Some companies may not even realize they are doing this, they just feed the data into a machine learning algorithm, it sees correlations and makes predictions, and the crime is hidden in the unfathomable depths of the black box algorithms. Maybe we need a new category of crime, crimes hidden in AI, not unlike biases that have been found in machine learning algorithms or real estate price fixing via data sharing with an app. Just let the AI's route around the laws by producing magical answers that resist analysis.
  • Leveraging de-identified smartphone geolocation data, we provide new insights into the SEC's monitoring practice

    That data is available to anyone with a checkbook from the telecoms. Anyone from investors tracking SEC visits to foreign intelligence agencies identifying secure facilities, their employees and visitors.

    If you aren't tracking everyone from SEC investigators to Microsoft execs travelling to scope out their next acquisition, that's your problem.

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