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> it need only be information that is material and non-public. I think this is wrong as well. Suppose you are a independent technician repairing cars. Over ti

> it need only be information that is material and non-public. I think this is wrong as well. Suppose you are a independent technician repairing cars. Over time you notice, that, say BMW car quality used to be good but has gone to shit. That's not public information, but you would be allowed to short BMW stock in the hopes that, once public catches on, their share price will tank. In fact half the point of stock trading if for you to do research, including your own investigation and testing. And then use that as an advantage. In the process you are bringing the price close to it's true value. P.S. nothing against BMW, just an example.

colinmorelli 3y ago
"Public" doesn't mean the company has publicly announced it - just that the information is available to the public. The situation you're describing is very similar to the Boeing situation above. You just happen to be the first person aware of the news, because your job provides you the ability to see a bunch of cars and understand how their quality is trending. Nor is it any different than you buying, say, one of the first Rivans, thinking the QC was horrible, and shorting the stock. Regardless of when you learned it, the quality of BMW's cars (in this example) became public information when they started selling them to the public. Now, however, if an internal employee told the technician that BMW had removed all QA checks from their line, and (s)he should expect quality to fall precipitously in the years ahead, that would be different.
ghaff 3y ago
Just because Car and Driver hasn't published an expose doesn't mean the information isn't public. Presumably lots of other independent (and non-independent) technicians have noticed the same thing. Your observation may be sampling error or not something that is sufficiently noteworthy to have percolated up to all the car forums out there en masse.
jasode 3y ago
>I think this is wrong as well. The gp's wording is a little confusing but he's just trying to explain the transitive logic of non-public information transferring from a "true insider" to an outsider is also "insider trading" and thus illegal. Think of it as the provenance of information coming from an insider. E.g. Martha Stewart is an "outsider" and not an insider of drug company ImClone but she was found guilty of insider trading because she did get confidential information from insiders at the Merrill Lynch brokerage that handled stock trades for the ImClone CEO: https://www.sec.gov/news/press/2003-69.htm https://www.sec.gov/news/press/2003-69.htm Your scenario of a mechanic repairing cars, or somebody counting the number of cars in various Walmart parking lots, or a hacker that discovers a serious website vulnerability that may cause embarrassment and stock price drop ... none of those situations have a corporate insider in that information disclosure loop.
- injb 3y ago
  >> Martha Stewart is an "outsider" and not an insider of drug company ImClone but she was found guilty of insider trading Minor correction: she was not convicted of insider trading. That charge was dismissed. She was only convicted of lying to investigators.
  - deleted 3y ago
    [deleted]
  - bhk 3y ago
    I can't find any evidence that she was ever charged with insider trading. The judge dismissed a charge of "securities fraud", which claimed that she had defrauded investors in her own company by making false statements to the public. The jury convicted her of "false statements", obstruction, and conspiracy.
- colinmorelli 3y ago
  Slightly clarified my comment via a parenthetical. "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization. I was trying to avoid the use of "insider," because people tend to assume that means employees or directors, but that is not the case. Outside organizations who have, as an example, signed an NDA with the organization may learn of material non-public information, and trading on that could constitute insider trading.
  - nightpool 3y ago
    > "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization. Right, but information available to those with a confidentiality obligation can still be traded on if acquired legally. That's the crucial point. It's not enough for it to be non-public and material, you must also be in breach of a fiduciary duty (or acting in concert with somebody who is). For example, if a Boeing CEO was at a coffee shop discussing an upcoming acquisition at the table next to you, you'd be able to trade on it, even though it was confidential information not available to the general public and obviously material to Boeing's stock price.
mytailorisrich 3y ago
It's not insider trading to judge the quality of a product based on what you experience of the product in the wild and to make an investment decision accordingly. It's just being canny. Now, if you learned from someone inside that they were going to do a recall but had not announced it yet, on the other hand... That being said, I am sure that insider trading is widespread (e.g. above example). The thing is that is it not easy to detect unless you are already on the radar.
raverbashing 3y ago
This is not "non public" information and to be honest it might not even be material "Non public" usually means an information that's internal to the company, not necessarily something that can't be gathered independently Google's menu for the week in their offices is "non public" but not material information
jack_pp 3y ago
Seems to me the technician does have public information, he is not the only technician that has that data he might just be the only wise enough to notice the pattern
victorbjorklund 3y ago
This is not insider information you got from the company. You just observed the world. Totally allowed. What would not be allowed is if you got hold of info from BMW that showed way more repairs than previously reported etc (and it was material for the company).
refurb 3y ago
There is a court case about this. https://www.compliancebuilding.com/2014/02/06/working-on-the-railroad-is-not-insider-trading/ https://www.compliancebuilding.com/2014/02/06/working-on-the... Roadroad workers notice a bunch of visitors in suits, boss asked them to put together an inventory of property. So they thought the company was going to be sold and profited on it. SEC charged them, courts found them not guilty of insider trading.

colinmorelli 3y ago

"Public" doesn't mean the company has publicly announced it - just that the information is available to the public. The situation you're describing is very similar to the Boeing situation above. You just happen to be the first person aware of the news, because your job provides you the ability to see a bunch of cars and understand how their quality is trending. Nor is it any different than you buying, say, one of the first Rivans, thinking the QC was horrible, and shorting the stock. Regardless of when you learned it, the quality of BMW's cars (in this example) became public information when they started selling them to the public. Now, however, if an internal employee told the technician that BMW had removed all QA checks from their line, and (s)he should expect quality to fall precipitously in the years ahead, that would be different.

ghaff 3y ago

Just because Car and Driver hasn't published an expose doesn't mean the information isn't public. Presumably lots of other independent (and non-independent) technicians have noticed the same thing. Your observation may be sampling error or not something that is sufficiently noteworthy to have percolated up to all the car forums out there en masse.

jasode 3y ago

>I think this is wrong as well. The gp's wording is a little confusing but he's just trying to explain the transitive logic of non-public information transferring from a "true insider" to an outsider is also "insider trading" and thus illegal. Think of it as the provenance of information coming from an insider. E.g. Martha Stewart is an "outsider" and not an insider of drug company ImClone but she was found guilty of insider trading because she did get confidential information from insiders at the Merrill Lynch brokerage that handled stock trades for the ImClone CEO: https://www.sec.gov/news/press/2003-69.htm https://www.sec.gov/news/press/2003-69.htm Your scenario of a mechanic repairing cars, or somebody counting the number of cars in various Walmart parking lots, or a hacker that discovers a serious website vulnerability that may cause embarrassment and stock price drop ... none of those situations have a corporate insider in that information disclosure loop.

injb 3y ago
>> Martha Stewart is an "outsider" and not an insider of drug company ImClone but she was found guilty of insider trading Minor correction: she was not convicted of insider trading. That charge was dismissed. She was only convicted of lying to investigators.
- deleted 3y ago
  [deleted]
- bhk 3y ago
  I can't find any evidence that she was ever charged with insider trading. The judge dismissed a charge of "securities fraud", which claimed that she had defrauded investors in her own company by making false statements to the public. The jury convicted her of "false statements", obstruction, and conspiracy.
colinmorelli 3y ago
Slightly clarified my comment via a parenthetical. "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization. I was trying to avoid the use of "insider," because people tend to assume that means employees or directors, but that is not the case. Outside organizations who have, as an example, signed an NDA with the organization may learn of material non-public information, and trading on that could constitute insider trading.
- nightpool 3y ago
  > "Non-public" in this context refers to information which would only be available to those with a fiduciary responsibility and/or a confidentiality obligation to the organization. Right, but information available to those with a confidentiality obligation can still be traded on if acquired legally. That's the crucial point. It's not enough for it to be non-public and material, you must also be in breach of a fiduciary duty (or acting in concert with somebody who is). For example, if a Boeing CEO was at a coffee shop discussing an upcoming acquisition at the table next to you, you'd be able to trade on it, even though it was confidential information not available to the general public and obviously material to Boeing's stock price.

mytailorisrich 3y ago

It's not insider trading to judge the quality of a product based on what you experience of the product in the wild and to make an investment decision accordingly. It's just being canny. Now, if you learned from someone inside that they were going to do a recall but had not announced it yet, on the other hand... That being said, I am sure that insider trading is widespread (e.g. above example). The thing is that is it not easy to detect unless you are already on the radar.

raverbashing 3y ago

This is not "non public" information and to be honest it might not even be material "Non public" usually means an information that's internal to the company, not necessarily something that can't be gathered independently Google's menu for the week in their offices is "non public" but not material information

jack_pp 3y ago

Seems to me the technician does have public information, he is not the only technician that has that data he might just be the only wise enough to notice the pattern

victorbjorklund 3y ago

This is not insider information you got from the company. You just observed the world. Totally allowed. What would not be allowed is if you got hold of info from BMW that showed way more repairs than previously reported etc (and it was material for the company).

refurb 3y ago

There is a court case about this. https://www.compliancebuilding.com/2014/02/06/working-on-the-railroad-is-not-insider-trading/ https://www.compliancebuilding.com/2014/02/06/working-on-the... Roadroad workers notice a bunch of visitors in suits, boss asked them to put together an inventory of property. So they thought the company was going to be sold and profited on it. SEC charged them, courts found them not guilty of insider trading.