Does &quot;insider trading&quot; apply to private companies? In America, "pitching" to investors is how capital is often raised. What I don't understand is why this is legal: You supply private information to the investor, who decides to buy stock in your company based on this private information. Is the fact that the company is private what makes this legal?
No, insider trading doesn't apply to private companies. By definition private companies don't trade their stock on the open market. Trading on the open market provides access to an immense pool of capital (anyone with the price of a share of stock), but the trade-off is that there are many more strictures on corporate behavior and governance. Private companies have far more latitude in their corporate governance, but on the other hand they are far more limited in who they can sell stock too, typically being limited to accredited investors. Edit: It seems that in the US this answer is actually wrong, but the situation is complex. The SEC has sanctioned privately held companies under Rule 10b-5 for fraud and misrepresentation for stock transactions where material information was withheld from the other parties. Stiefel Laboratories, a privately held firm, was charged with buying back employee shares without disclosing that it had multiple offers from private equity firms to purchase stock at a higher price, or revealing that it was in negotiations to sell the company to GlaxoSmithKline.
Yes and no. [note, the following is all written about US law. In other jurisdictions laws are, of course, different (though usually not drastically so.)] In the US there are (at least) three different bodies of law that might apply to code: copyright, patents, trade secrets. Copyright covers original expression. Anything you write is automatically, immediately protected under copyright. The copyright applies to the code itself, and anything "derived" from that code. It's up to the courts to decide exactly what "derived" means. One case that's long been viewed as a landmark in this area is Gates Rubber v. Bando Chemicals. The Court of Appeals for the tenth Circuit decision includes a section titled: "The Test for Determining Whether the Copyright of a Computer Program Has Been Infringed." Note that you can register a copyright, and that can be worthwhile, such as helping recover some damages you can't otherwise. Patents are quite different from copyrights. Where a copyright covers expression of an idea, a patent covers a specific invention. Rather than being awarded automatically, a patent has to be applied for, and awarded only after the patent office has determined that there's no relevant prior art to prevent it from being awarded. A patent, however, covers things like somebody else independently discovering/inventing what's covered by the patent. A trade secret could (at least theoretically) apply to some process or procedure embodied in the code. A trade secret mostly applies to a situation where (for example) you're trying to form an alliance with some other company, and in the process tell them things you don't tell the general public. If you've identified the fact that what you're telling them is a trade secret, and they then tell a competitor (or the general public, etc.) or more generally use that information in any way other than the originally intended purpose, it could constitute a trade secret violation. As a side-note: patents and copyright fall under federal law, so they're basically uniform nation-wide. Trade secrets mostly fall under state law, so the exact details vary by state. Absent a reason to believe otherwise, I'd guess your interest here is primarily in copyright infringement. The key here would be showing that one piece of code was derived from the other. That is, it specifically would not apply in a case where there were only a limited number of ways of doing something, so anybody who wanted to do that had to use one of those ways. Since this would not indicate actual derivation, it would not indicate copyright violation.
A SAFE is basically what used to be called a &quot;subscription agreement&quot;, i.e. an agreement to invest money in the future that will ultimately give rise to an equity investment if made. From a practical perspective, while the contract is legally enforceable, pursuing a lawsuit to enforce it is almost always a death knell level bad move. Firms who sue investors early in the game don't get future investors. The amount of time it takes to enforce such an agreement in a lawsuit is also too long (perhaps a year or two before you have money in hand if it runs its course and still many months if it settles), and the cost of doing so is too great (probably more than $40,000 that you won't get back to bring in $400,000), for it to make sense to do so at the delicate early stage of a start up. Instead, what you need to do is get on the phone with the investor, or quite possibly meet in person, at their offices or in a more casual deal making environment over drinks, for example, to figure out what is troubling them or slowing things up and how to make them happy. This is more of a function of continuing to sell the fact that you are good investment and an opportunity that they are missing out on, than it is about telling them about your legal rights. If this fails, it is probably wiser to seek financing from someone else than to force them to perform.
In the US, in general anyone can claim anything. Others are free to believe or disbelieve the claim. In theory, a person might base their decision to do business with Hilton partly on this particular claim (this is why some software companies start presentations about their new features with a Safe Harbor statement letting the audience know not to base purchasing decisions on unreleased features), and in that case they could argue that Hilton's claim damaged them by causing them to enter into a contract under false pretenses. I doubt such a case would be meritorious, but there could be some contrived situation where the point of whether Hilton owned the hotel when it invented the brownie was actually important.
united-states That is going to depend greatly on the circumstances. In the US generally anyone may express an opinion on the value or merits of an investment, indeed that is protected speech under the first amendment. However, a person with an interest in a stock or other security who publishes an opinion or statement intended to deceive people, with the further intent of profiting by the deception, may well have committed securities fraud. If the published text contains false statements of fact, known to the author to be false, or that the author knows have not been checked and might well be false, that is additional evidence of such fraud. There are other cases in which such posting of an alleged &quot;opinion piece&quot; might be criminal or an actionable tort. But that would not make the site illegal. It would be the specific acts by specific people that would be illegal. Only if the site were routinely used for such unlawful purposes and seemed to have no legitimate purpose would one be likely to say that the site was illegal, and even then it is a stretch.
Yes it is perfectly legal. Good luck finding investors for a such an indebted company, though. (Not disclosing the contract to potential inverstors would be illegal.)
The linked Bloomberg story quotes the rule as: The recipient is allowed to keep the funds if they [the funds] discharge a valid debt, the recipient made no misrepresentations to induce the payment, and the recipient did not have notice of the mistake. If the recipient, or somone acting on behalf of the recipient, hacked the sender to induce the payment, that sounds like a form of misrepresentation to me. If the hacker is unconnected with the recipient there seems no way that the hacker benefits financially, although I suppose a hacker might simply want to cause an amusing disruption. As I understand it this rule only applies when the sender in fact owes a debt to the recipient that the transfer pays off. If the hacker were working for one of a large group of recipients, most of whom are innocent, and subsequent analysis establishes that there was a hacker, but not who the hacker was or which of the many recipients the hacker was working for, I suspect, but cannot prove, that the doctrine would not apply, because the transfer was not a valid but incorrect act by the sender, but was a fraudulent intervention in the sender's procedures.
No, but ... The CEO is an officer of the company (as are the directors and any others with the ability to substantially exercise control over the company) and as such, owes fiduciary duties to the company - not to the shareholders or any subset of them. For example, if it is in the best interests of the company to enter a trading halt but not in the best interests of the current shareholders then the duty on an officer is to do what’s best for the company. As another example, for a crime many limited by guarantee rather than by shares it’s rarely in the owner’s interest to have that guarantee called but it might be in the company’s interest.