YTB And The SEC

Many have opined that the release of the memo was an effort to hold off the departing directors--there are reportedly 15 to 20 more departing in the next week to ten days. It is quite possible. However, it may have been one of their biggest "whoops" moves since it may technically be a violation of the Security Exchange Commission's (SEC) regulations on insider trading. By releasing the memo of a tentative settlement only to "certain" individuals a full 24 hours prior to announcing it to the public, YTB may have dealt insider information. And if you look at the volume of their stock (YTBLA.ob), you can see that there was significant action on it. The volume was nearly five times normal volume.

So, lets say that one of the "Travel Professionals" at YTB got a hold of this information at 3:47pm on Monday, April 6th when the stock was trading at 16 cents. Feeling that the stock could only go up on the public release of this news, a "Travel Professional" buys 20,000 shares for $3200.00. Let's say that the "Travel Professional" passes the word onto everyone he knows who also buys up the shares because YTB has not released the information yet. It might draw five times the volume on Tuesday April 7th. Late in the day on April 7th at 3:17pm, YTB finally releases the information that they distributed the memo 24 hours prior. Now that the information is public, the stock, predictably went up. Now just suppose that the "Travel Professional" sold his 20,000 shares on April 8th when the stock was trading at 34 cents. He would walk out with $6,800.00. That is a 112% gain in slightly more than 24 hours. And if the stock was held, it is likely to increase some more this week as the mystery surrounding the settlement fuels the market. To me, this seems like insider trading.

But what does the Securities Exchange Commission have to say? For those that are interested in investigating insider trading, you can visit the SEC's website. Here is what they have to say on "insider trading". Pay particular note to the first two bullet points:

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Examples of insider trading cases that have been brought by the SEC are cases against:

• Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;
• Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;
• Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;
• Government employees who learned of such information because of their employment by the government; and
• Other persons who misappropriated, and took advantage of, confidential information from their employers.

The SEC even has a "bounty program" which offers cash rewards for tips that lead to convictions of insider trading. And it is even very simple for anyone to file a complaint right on their site. Technology is a great thing!