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Judging from the answer to "What is insider trading exactly?" that defines it as any trading done on material non-public information relating to an instrument, it seems overly restrictive to me to ban it.

By minor extrapolation, such a ban (especially with the harsh penalties mentioned) may mean that all sort of profit that is made on information relating to good or service that is not public is inherently wrong.

Yet, if I were to spend time and money discovering new applications for, say, aluminium, and suddenly stumbled upon a billion-dollar opportunity, be I an individual or a multi-billion dollar corporation, and started buying aluminium en masse, am I technically not guilty of insider trading-like activity? I'm using information that is unknown to the general public (such as the new invention involving aluminium as material for production) to profit off a commodity (aluminum).

While I get the gist of how easily abused can insider trading be, as a proponent of libertarian economics, I don't see a lot of difference between utilising private information relevant to a stock to utilising private information relevant to a good.

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The core point is that the option to get that private information needs to be equally open to everyone. If you spent your time to investigate some aluminum usage and find something that allows you to make millions of it, that is fine, because everyone had the chance to do the same, you just chose to or were first (or most successful) to do it.

Insider Trading is about the use of infomation that you have due to your position or role in an organization (like you are the CFO, or his assistant, or the intern that makes his slides for the annual shareholder conference), and by that you get information earlier than the public. The general public does not have legal access to that information until it is published.

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    From my knowledge, it would still make you quite liable if you were not directly involved with the company, but had information about the CEO, such as his well-being and whatnot. I'm sure out-of-company insider traders would also be subject to prosecution, regardless of whether they saw the CEO get hit by a car or whatnot. – Ivan T. Oct 18 at 13:39
  • @IvanT. If you witnessed the CEO being hit and immediately bought or sold stock in his company, you'd be ok. If you were the attending EMT or doctor, you'd be in trouble. – JACK Oct 18 at 14:25
  • @JACK based on what? Insider trading applies to people with a fiduciary duty to the company or to the market in general. What fiduciary duty does an EMT have to the company or markets? – quid Oct 18 at 15:04
  • @quid If the EMT is called in professionally to treat the CEO and then looks for financial gains from knowledge that is protected by law (medical info), he could be in trouble... – JACK Oct 18 at 16:52
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    No, he didn't share any HIPAA information, he didn't tell anyone about his night schlepping a CEO to a hospital, the CEO was hit in public, and he doesn't have a fiduciary duty to the company. He's not different than a stranger on the street seeing the CEO get hit by the car before he showed up. – quid Oct 18 at 17:18
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Fundamentally a company and it's officers have the duty to act in the interests of the owners of the company (in proportion to their stakes) and not favour one owner over another. Unfortunately in the case of insiders who own company stock this duty conflicts with their personal financial interests.

On the other hand you do not have any duty to the other owners of aluminium, so there is no conflict of interest in your trading based on your discovery.

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