Trump's stock market move: Allegations of insider trading?
In the United States, regulations permit penalties for what is termed insider trading. Recent actions by U.S. President Donald Trump have sparked a debate about potential violations of these regulations, noted Hubert Stojanowski, director of client investments at Dom Inwestycyjny Xelion, in a conversation with PAP.
On 9 April, President Trump posted on social media in large letters: "THIS IS A GREAT TIME TO BUY!!!" He suggested purchasing stocks to those following his profile. A few hours later, his administration announced a 90-day pause on imposing tariffs, limiting itself to 10% tariffs on almost all countries worldwide and 145% tariffs targeting China.
This decision caused the S&P 500 index to rise sharply, reaching its highest values since the economic recovery after the 2008 crisis, as noted by the New York Times.
- Based on these events, Donald Trump was accused of insider trading, emphasised Stojanowski.
Trump involved in insider trading?
- This is the use of confidential, non-publicly available information. For example, a person possesses information about company X's financial results, set to be published in four days. They know the results will be much better than expected. Then, using this information, they buy stocks before the results are published, knowing that the stock value will significantly rise, explained the expert, describing the mechanism of so-called insider trading.
Stojanowski pointed out that the situation is unusual in that, as early as 7 April, there were—later denied—reports in investment circles, allegedly from the White House, stating that tariffs would be halted.
These reports significantly impacted stock prices on the New York Stock Exchange. On 7 April, we observed a dynamic increase in stock prices, which fell after the reports were denied, he noted.
Trump's 9 April post and the administration's decision to halt tariffs immediately drew reactions from politicians of the opposition Democratic Party. - How is this not market manipulation? – asked Congressman Mike Levin from California on social media. Democratic Senator Adam Schiff from the same state suggested in his post using government information for market speculation. - Did anyone buy or sell stocks, and profit at the public’s expense? - wondered the politician.
On 11 April, six leading Democratic Party senators, including Elizabeth Warren, Chuck Schumer, Ron Wyden, and Adam Schiff, sent a letter to the U.S. Securities and Exchange Commission (SEC).
In the letter, the politicians demanded an investigation into the possible use of public information by individuals associated with the Trump administration and the president's family to manipulate the market. "Insiders may have known that he was going to announce a tariff pause and that the market would improve," argued the senators.
- The exact same information could be heard in investor circles on Monday, noted Stojanowski, commenting on the Trump administration's 9 April announcement. He admitted that "it looked at least questionable."
He further noted, "I am not a lawyer, nor am I familiar with the U.S. legal system, so I am unable to unequivocally determine whether the described situation constitutes so-called insider trading, since the post was public." - However, indeed, we are dealing with something that may have signs of market manipulation, assessed Stojanowski.
Millions of pounds in fines for insider trading
The expert also emphasised the ethical dimension of the whole situation. "From a purely ethical point of view, the situation looks at least troubling, as it may suggest an attempt to influence the market and enable certain people to benefit at the expense of others," noted the interviewer.
Meanwhile, Professor Kathleen Clark from Washington University, quoted by "NYT," said, "If we still had a rule of law, a robust system for the rule of law, it would be investigated."
The White House, however, defended the president's actions. - It is the responsibility of the president of the United States to reassure the markets and Americans about their economic security, emphasised Kush Desai, a spokesperson for the administration, in a conversation with the newspaper.
"In a statement, the S.E.C., which reviews possible violations of federal securities laws, declined to respond to questions about Mr. Trump’s post," conveyed the "NYT."
In the United States, individuals found guilty of insider trading can face up to 20 years in prison and a fine of up to £4 million, while companies can face fines of up to £20 million. Additionally, the SEC can impose financial penalties on entities engaged in insider trading of up to three times the profit gained or the loss avoided.
