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Let's say I own shares in the MSCI World ETF. Company X, where I am an employee, is currently not part of it. What happens when in ie a year Company X gets added to the ETF - Is my owning stock in it considered insider trading?

If so, would it mean I need to sell my existing share in this ETF or should no longer buy more of it?

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    Insider trading is not just owning stock in the company you work for. It is making decisions about buying or selling that stock using information that only an employee of the company would have.
    – chepner
    Jan 14 at 13:01
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    If so, employee stock purchase plans would be illegal. :)
    – JohnFx
    Jan 14 at 14:55
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    This is indirectly answered by learning what exactly insider trading is (this is probably a duplicate of that).
    – NotThatGuy
    Jan 14 at 22:22
  • Why would the typical investor in a fund know or care what particular stocks the fund owns? Isn't that one of the reasons for buying funds, so that you don't have to concern yourself with details of individual stocks? (I own an S&P 500 index fund, but I'd be hard pressed to name even one of the stocks in the index.) Worst case, you've got plausible deniability :-)
    – jamesqf
    Jan 15 at 18:04
  • @jamesqf Guess the name of a large-cap U.S. company. With the S&P500, you'll probably be right. :)
    – reirab
    Jan 15 at 21:03
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No.

Owning a stock is not trading a stock.

See https://en.wikipedia.org/wiki/Insider_trading.

If you are in a position of the company where you know (positive or negative) information about the company which would materially impact the stock price, you only commit insider trading when you use that knowledge before it becomes public knowledge.

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    It may also be worth mentioning that making trading decisions about bundles including the stock, and on competing stocks based on insider knowledge are also discouraged.
    – fectin
    Jan 15 at 0:31
  • @fectin make the edit. Someone will approve.
    – RonJohn
    Jan 15 at 2:01
  • There could be a stretch where it happens; you buy the ETF knowing that your stock is going to be added in the future and that shortly afterwards your company is going to announce something big that will make its stock price skyrocket. But that is going to be a narrow window.
    – Yakk
    Jan 15 at 15:26
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    @Yakk If the OP has a history of regularly buying this stock (e.g. dollar-cost averaging), and they continue in the same vein, they could probably defend their actions. However, if they make an unusually large purchase (or, if every purchase is irregular/unusual), they might run into trouble.
    – jpaugh
    Jan 15 at 15:36
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    @Yakk Honestly, even in that window, it seems pretty unlikely that you'd get into trouble, at least with most ETFs. An individual stock usually represents a small enough part of a fund that, even if you had inside information that one of the component stocks was going to skyrocket, the gains would be so diluted that the ETF wouldn't change much. It's still probably technically a violation of the law, but probably pretty unlikely to be noticed or cared about given the relatively tiny effect.
    – reirab
    Jan 15 at 21:01
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Let's say I own shares in the MSCI World ETF. Company X, where I am an employee, is currently not part of it. What happens when in ie a year Company X gets added to the ETF - Is my owning stock in it considered insider trading?

The only way this would be insider trading is if you were providing non-publicly available information to the investment managers of the fund. For example if you had the numbers for the quarterly report a week before they were being released and you gave the numbers to MSCI.

The opposite is true. If you work for company X and the ETF/Mutual fund owned stock in your biggest competitor (Company Y) your boss wouldn't fire you for having a conflict of interest.

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