Is Murder Securities Fraud?

My rule of thumb is that every bad thing that a public company does, or that happens to a public company, is also securities fraud. This is not literally true — really it’s only securities fraud if the company is lying to investors about the bad thing1 — but it is a useful rule of thumb. If you find a bad thing that has happened to a public company, I will find you a securities fraud case, even if it doesn’t seem like anyone is lying.

For instance: If an executive of a company is murdered, is that securities fraud? Brian Thompson, an executive at UnitedHealth Group Inc., was shot and killed outside an investor meeting in Manhattan last year by a gunman who seems to have objected to UnitedHealth’s business practices. The stock was down about 5% the next day. Is that securities fraud?2 Not in the traditional sense, or even in most of the “everything is securities fraud” senses. It’s not like UnitedHealth kept the murder secret from its shareholders: It was national news from pretty much the minute it happened. And it would be hard to make a case like “UnitedHealth should have warned shareholders that its executives might get shot, which would be bad for the stock price, but it didn’t disclose that risk so shareholders were misled.” That could happen to any company; seems like a weird thing to put in the risk factors.