Is It Deceptive To Lie To A Machine?
John Jenkins at TheCorporateCounsel.net writes this morning about the Securities and Exchange Commission's announcement that it has filed a civil complaint against nine defendants for hacking the EDGAR system. The SEC's complaint alleges that these defendants used information derived from trading to engage in advantageous trading. When the hacking was discovered a year ago, I speculated on whether hacking could be "deceptive" for purposes of Rule 10b-5:
"Typically, we think of people being misled. Can machines be deceived? Should or would the result be different if the hacker had instead of using a pilfered password to trick a machine had exploited a software weakness?"
According to the SEC, the alleged hacking did involve misrepresentations as an EDGAR filer and using numerous aliases to gain access. Thus, a court may have to decide whether lying to a computer is a deceptive device for purposes of Section 10(b) and Rule 10b-5.