Good point. Unless he has never traded in his life and/or never bothered to pay attention to these, which is not very likely.
he did not say he works for a financial institution. What you say is only true for brokerage employees. I don't think that an IT engineer working for a bank should declare his positions. He also said he does not have insider info and he is nobody in that company. The fact that he mentioned in a few years he believes his stocks will go down more, shows that he is not working for a financial company (unless he is a Ron Paul follower!!). Mostly he works for a tech or a retail company. The chance that you get heart attack and die with this anger that you show in your posts is higher than he might get caught because of his short trades !!
That was precisely my point. We do not know as OP did not state in which industry he works. Hence I do not think it is sound advice to tell him/her that with absolute certainty he/she can short the stock. Additionally, there are many IT firms that require pre-clearance in case of trading the firm's own stock. Else, every manager or executive would do so and stock option grants would become meaningless.
He is not outright short in his position, he is simply hedging to avoid a large loss on his long position. If he shorts dollar for dollar, he has effectively locked in his current gains and will not participate in any upside move in the stock. Effectively Mark Cuban did this about 15 years ago but he used options.
The reason that many employees don't do it is not because they are ethical people. It is because they don't know about options and how short works and they don't care and just wait till the options/stocks gets vested and most of the time they do the wise thing and get more money. Even if want to short stocks, they still need to deposit cash into their account to short and if they get laid off before the stock gets vested, they will end up just being short and if the company pays dividend, they have to pay dividend. I lost money in some incidents when I shorted the stock of my company so I had a proof that I don't have insider info otherwise I should have made money. Definitely you cannot use unvested options or stocks as a collateral for your short position.
Personally I would not do this. But if you're not restricted from derivatives you could blur the waters by doing it synthetically (short call, long put) however even that might be sketchy. If the company has a large weight in an ETF you can also partially play it via shorting said ETF but it'd have to be a major company.
you keep on talking about the economics of this whole issue when the question is a compliance and legal one. Geez...
I already answered the legality of the issue. If you go and ask HR that can you short the company's stock? the answer would be NO but I would do it and I also responded the company wont care about a low or medium level employee shorting a few thousand shares of the stocks and I also mentioned the rule is don't ask don't tell. So clear. If you want to argue that don't do it because GOD wont forgive you and ..... that is another story.
Don't ask don't tell? You hold the same in case you overhear potential insider information and act on it? Quite a low moral standard you are representing here. To each his own.