41

It doesn’t matter how far away you are. If you have important information that the public doesn’t then it’s insider trading. Obviously the distance makes it harder to prove or even to suspect. The SEC defines illegal insider trading as follows: Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or ...


37

A cautious "no." Public information is just that, public. If you are able to data mine and use that information to create a buy signal, you are legally able to trade on that signal. Since nothing is ever 100%, your signals would likely just exhibit a very high correlation to stocks being traded on inside information. Regardless of why those trades happened, ...


34

Insider trading is any trading done on material non-public information relating to an instrument. If my sister, who works for a drugs testing company, tells me that stage 3 trials of a drug look like they will fail and I trade on that information (probably by shorting a company's stock) that is insider trading. If an employee of that firm trades on that ...


14

The definition of "insider trading" is that it is taking advantage of information that is not available to "the public". Like many laws, this can be tricky to evaluate in real life. At the extremes: If you see a news story on a major TV network saying that XYZ Company just got a big new government contract, and you then buy stock in XYZ, that's pretty clear ...


10

I am a flight attendant on a private jet and I hear a bank CEO discussing a merger or a buyout. I proceed to purchase that stock before the announcement. The CEO did not tell me to buy it, I just overheard him. If you are a flight attendant on a private jet that is operated by one of the principals, probably including a bank, attorney, consultant, ...


7

Making any decision based on insider information is illegal. Whether the US Government will be able to prove these facts in court is a different question. That said, your post here may be brought in as the proof (and if you think you're anonymous here - think again).


6

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 ...


6

I don't think the commercial describes insider trading. For a large corporation, the amount of inventory on the shelves in the stockroom in one location isn't insider information. It tells you nothing about the overall health and plans of the company, but it might tell you something about that one location. Having an advanced copy of the monthly inventory ...


6

The CEO of a public company can, and often does, buy (and sell) the stock of his company. In fact, frequently the stock of the company is part of the compensation for the CEO. What makes this legal and fair is that the CEO files with the SEC an announcement before he buys (or sells) the stock. These announcements allow us 'in the dark' people enough warning ...


5

I will restrict my answer to Canada and the US, the only jurisdictions with which I am familiar. Contrary to the other answer, the statutory and regulatory insider trading regimes in both the US and Canada require an actual transaction ("purchase or sale of securities") to occur. If no transaction occurs, there is no insider trading. There is a possible ...


5

"Material Information" means that any information that can reasonable affect the share price of the company [upward or downward] as looked by the investors. The idea is to provide a level playing field to all investors. Hence it forces people having material information not to trade when they have this information that is not yet disclosed. Yes it happens ...


5

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 ...


4

Nothing at all wrong about that. Be careful that especially before big news, it's rather common that there are huge swings because (a) the market makers pull/widen their quotes, (b) others already do what you are describing and (c) other actors try to exploit the situation by moving the market in one direction chosen at random and taking the profit before ...


4

I find it highly unlikely that either transaction would be considered illegal. Illegal insider trading requires "material, nonpublic information about the security." The information in your scenario is nonpublic information about a different company. Unless there is a direct relationship between the information and DHI (e.g. if Tesla would cancel an existing ...


4

I think you'll find that insider trading is pretty loosely defined, and left up to the SEC to interpret and enforce as they see fit. According to the Securities Exchange Act of 1934: With this Act, Congress created the Securities and Exchange Commission. The Act empowers the SEC with broad authority over all aspects of the securities industry..... In the ...


3

Some history: In the US, this is very tightly controlled and regulated. Although stock market securities insider trading is a relatively new crime around the world (20-30 year old), the United States is exceptional for offering the longest sentences for it, although it is still far more lucrative than and carries lower sentences than something like petty ...


3

So is knowledge of unannounced products simply not considered material nonpublic information? Well "material" is relative but it certainly is nonpublic information. And trading based on that information would likely be considered illegal if it is actually material. Many companies require that employees with material non-public info get stock trades ...


2

There's the question whether knowledge about unannounced products is actually "material" if everyone (the public) knows that something new will be released. If you work at Apple on the development of the iPhone 8, that's not material. If you worked at Apple and you knew that they stopped developing new phones, that would be very, very, very material ...


2

I believe executives place stock on auto-sell, meaning it's sold on a regular pre-specified schedule. I've seen executives usually only relinquish larger positions when an all-time high is reached (eg., positive results on trial of lead drug candidate), at time of retirement, or when leaving the company for another position. This otherwise sends a negative ...


2

One scenario described in the original question -- a non-insider who trades after informal conversations with friends, where no insiders directly benefit from any such disclosure -- might not be illegal. (IANAL -- this is just my personal interpretation of articles in the news recently.) http://www.bloomberg.com/news/articles/2015-10-05/insider-trading-...


2

It becomes illegal when it is both material and nonpublic information. Material being defined as: Information that you would want and significantly alters the perception of the stock. To your point -- "materiality" is really up to the courts Nonpublic This is a little easier to define, but need to be careful if the information is disclosed selectively -- ...


2

You mention Martha Stewart, but she didn't get the information from her broker, she got the information from the head of the company. A service many brokers provide is investment advice. You know that even an honest broker doesn't know with 100% certainty that a predicted price movement will happen. You should ask them how they determined advice. Was it ...


2

In this situation, you should ask your broker how he obtained the information. He may have gotten it from a public source you overlooked. If he’s shady about it or not communicating with you clearly, you need to report it. If you don’t feel comfortable reporting it, contact a lawyer for help. He or she can help with the steps you should take.


2

I worked at a big tech company and was limited to the trading windows. Once a quarter, I would receive an email telling me what the trading window was. I'm pretty sure that were no confidentiality restrictions on this info. I suspect that no company would make this info confidential for a few reasons: Often, there is a large number of people subject to ...


1

I am not a lawyer, I'm definitely not your lawyer. Never act on material non-public information (see https://money.stackexchange.com/a/55407/22837 for a good description of what I mean by that). If you were to provide this rumour (which is effectively all it is - you have no evidence of its veracity but let's assume it's true) to a news outlet of record (as ...


1

You have to read some appeals court cases see scholar.google.com , as well as SEC enforcement actions on sec.gov to get an understanding of how the SEC operates. http://www.sec.gov/spotlight/insidertrading/cases.shtml There are court created guidelines for how insider trading would be proven There is no clear line, but it is the "emergency asset ...


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