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The biggest no-no for trading is when you get information about a tender offer, that being one company buying another. Even if you're in the bathroom and you h

The biggest no-no for trading is when you get information about a tender offer, that being one company buying another. Even if you're in the bathroom and you hear the guy in the next stall over talking about it on his phone you're not supposed to trade on that information because everyone knows that a potential tender offer is material non-public information.

hansvm 2y ago
A potential tender offer isn't always non-public though. The ones which are non-public are presumably less likely to be discussed somewhere as public as over a bathroom stall. If you as a random Joe unaffiliated with the companies in question don't know it's material non-public information then you can trade on it. The other facts might matter, like if you bragged to somebody about the non-public information you overheard (or, as in this case, where you were a member of the company in question), but it wouldn't be a slam-dunk case if the only facts were trading on bathroom stall intel.
Majromax 2y ago
> a potential tender offer is material non-public information. Matt Levine discusses this sort of thing quite often in his Money Stuff newsletter. Under US law, the problem of insider trading isn't market manipulation, it's theft. Material non-public information obtained with a duty of confidentiality is considered the property of the company, and thus trading on it is misappropriation/theft of the company's secrets. If you overheard news of a merger because two executives were chatting loudly in a cafe, then you'd have no duty of confidentiality and could trade freely. Likewise, in this particular case one central issue at trial was that the defendant placed trades in violation of his company's policies against trading competitors' stocks. It's unclear whether he could have been prosecuted if the company's policies had no such restriction. European law, however, can take a more rigid stance against insider trading, more closely matching the intuition that trading on the material nonpublic information itself is bad.

hansvm 2y ago

A potential tender offer isn't always non-public though. The ones which are non-public are presumably less likely to be discussed somewhere as public as over a bathroom stall. If you as a random Joe unaffiliated with the companies in question don't know it's material non-public information then you can trade on it. The other facts might matter, like if you bragged to somebody about the non-public information you overheard (or, as in this case, where you were a member of the company in question), but it wouldn't be a slam-dunk case if the only facts were trading on bathroom stall intel.

Majromax 2y ago

> a potential tender offer is material non-public information. Matt Levine discusses this sort of thing quite often in his Money Stuff newsletter. Under US law, the problem of insider trading isn't market manipulation, it's theft. Material non-public information obtained with a duty of confidentiality is considered the property of the company, and thus trading on it is misappropriation/theft of the company's secrets. If you overheard news of a merger because two executives were chatting loudly in a cafe, then you'd have no duty of confidentiality and could trade freely. Likewise, in this particular case one central issue at trial was that the defendant placed trades in violation of his company's policies against trading competitors' stocks. It's unclear whether he could have been prosecuted if the company's policies had no such restriction. European law, however, can take a more rigid stance against insider trading, more closely matching the intuition that trading on the material nonpublic information itself is bad.