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Suppose that, as an insider in Company A, I become aware of an upcoming business move by Company A that will have a huge negative impact on its share price, and a similar huge positive impact on the share price of Company B, the only major competitor to Company A. (Think just ceasing operation without any public warning.)

Clearly I can't dump my Company A stock, or short sell Company A, without violating insider trading regulations.

But can I buy a bunch of Company B? I have no insider information on Company B, or do I?

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    This is more of a legal question. However, I believe the relevant factor is not whether you have information "about Company B", but simply whether you have non-public information which is relevant to your trade.
    – BrenBarn
    Commented Oct 30, 2015 at 20:19
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    An example of trading on material non-public information in a company other than the one you work for: reuters.com/article/2014/08/08/… Commented Oct 30, 2015 at 22:14
  • I become aware This is am important point. How did you deduce the information ? If deduced from all public information this isn't insider trading. But if some component is from inside sources obtained privately this is indeed insider trading.
    – DumbCoder
    Commented Nov 1, 2015 at 15:43
  • @DumbCoder: Hypothetically, I work in the head office of Company A. I may have helped decide on the course of action that will hammer the shares of Company A. I may own shares of Company A, and clearly I could not trade in them. But I have no information from within Company B, whose shares I want to buy...
    – DJohnM
    Commented Nov 1, 2015 at 21:19

1 Answer 1

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This information is clearly "material" (large impact) and "non-public" according to the statement of the problem. Also, decisions like United States v. Carpenter make it clear that you do not need to be a member of the company to do illegal insider trading on its stock.

Importantly though, stackexchange is not a place for legal advice and this answer should not be construed as such. Legal/compliance at Company A would be a good place to start asking questions.

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