Many of us have had their afternoons ruined by dry compliance seminars packed with legalese about insider trading.

David Smyth, a North Carolina lawyer and a former Securities and Exchange Commission lawyer, offers guidance in a different way.

Inspired by a case now before the U.S. Supreme Court, Smyth has created “The Insider Trading Cartoon Series,” available on YouTube.

With the help of computer animation software, he’s made about a dozen shorts to explain the thicket of insider-trading laws, although without the dry legalities of the high court case. There are workplace scenarios about potential traps, what’s legal, and what could send you to prison.

“Insider trading is a mess,” Smyth said in an interview. “It’s like somebody built a living room somewhere and said, ‘Gosh, we need a kitchen, and we need a laundry room.’ Now all these rooms have gotten tacked onto this living room, but the construction of the house doesn’t make sense.”

His two- to three-minute shorts try to make the complexities of material, non-public information easy for even a child to grasp.

“Usually I’m sitting on my sofa at home with my 6-year-old daughter leaning on me looking at it and asking me, ‘Who’s that guy?”’ said Smyth. “I’m trying to explain it to relatively educated novices.”

So someone legally prohibited from trading is shown with a padlock over the head, while volatile inside information is depicted by an exploding mushroom cloud. A worker who steals a company secret and trades on it eventually ends up with his pants on fire.

Pixar hasn’t come calling, but Smyth is building a fan base. An ex-SEC official now working as a consultant asked to use a segment during a compliance seminar, and a lawyer who argued a 1983 case before the Supreme Court offered praise after being featured in a cartoon.

“He was known as being a thoughtful, almost professorial type, as opposed to a bohemian artist,” said Jordan Thomas, an ex-colleague. He’s impressed by Smyth’s approach. “It educates in a way that goes down easier than a dry presentation.”

A partner at Brooks, Pierce, McLendon, Humphrey & Leonard LLP in Raleigh, North Carolina, Smyth previously worked as an assistant director in SEC enforcement division. From 2005 to 2011, he led insider-trading and foreign-bribery investigations and helped establish the agency’s Office of Market Intelligence.

There’s an undercurrent of lawyerly humor to the work. When two executives discuss a pending deal, they’re dining at a cafe called “Chiarella’s,” a reference to the Supreme Court’s decision in Chiarella v. U.S. In that case, a printer was convicted of using illicit information about takeover bids he learned on the job. He was cleared after the high court found he didn’t owe a legal duty to the company whose shares were traded.

In another, a female figure with short hair and glasses named “Mary Jo” waves an American flag while she and a male figure named “Andrew” stand before a broken window. It’s a nod to SEC Chair Mary Jo White and enforcement chief Andrew Ceresney, and a reference to the agency’s “broken windows”strategy, under which the SEC goes after all infractions, no matter how small.

Smyth also takes on the 2014 appeals court ruling that lawyers call “Newman,” which made it harder for the U.S. to prosecute insider cases. An SEC lawyer battles a trader until a bomb labeled “Newman” appears and explodes.

Source:

http://www.bloomberg.com/news/articles/2016-10-25/insider-trading-stories-in-toon-town

 

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