Just because you may not be the one purchasing the shares, doesn’t mean you can’t be caught with your hand in the proverbial cookie jar. Sean Stewart learned this the hard way just a few days ago when he was convicted of conspiracy, securities fraud and tender offer fraud.


Insider trading requires that the person involved derive some “personal benefit” from the transaction. And if you are not the person actually transacting the trades, that person who is must have known that the insider was going to derive some “consequential” benefit from sharing the information.


In Stewart’s case, it was his father, through the use of a third party trading partner, that made all the transactions in question. In a nutshell, Stewart would openly talk about deals involving mergers he was working on, but claim he gave no specific dates or additional details. However, it was determined that Stewart’s father made about 4-5 stock transactions dealing with companies involved in Stewart’s mergers deals that ended up all paying off.


Stewart was even confronted about the stock trades by JPMorgan attorneys and thought nothing of it, continuing to provide information to his father.


But where was the “consequential” benefit to Stewart? It was argued that Stewart’s father used a portion of the illegally obtained funds (approximately $10,000) to pay for Stewart’s wedding photographer.


So what’s the take away here, what lesson should be learned? Yes, insider trading is illegal, wrong and unethical, and people should really think long and hard about acting on insider information because in the end the SEC will find out and come knocking on your door. But no, the lesson is this, if you already got caught with your fingers near the cookie jar, don’t keep going back and trying again. Stewart should have seen the writing on the wall when he was confronted by JPMorgan, he should have realized he was on the radar and moved on. That is not to say that he would have gotten away with it, but maybe his case would have returned a more favorable outcome if he had stopped while he was ahead.


Insider trading will always exist, especially when large sums of money are involved. But maybe once we let greed take a back seat to common sense and decency. (Wishful thinking, and obviously easier said than done.) To the Sean Stewart’s of the world, next time, quit while you’re ahead.