Is This Insider Trading?

[stinkypete]

[ QUOTE ]
1) Yes
2) Yes
3) Yes

in every circumstance you are privy to information that is not public knowledge. when you act on this information you are committing insider trading.

[/ QUOTE ]

for those of you saying #3 is insider trading, what if you go play blackjack at the wynn with your gambling addict friend, who loses, and on your way out he says something like "[censored] man, i hate this place, i'm gonna blow this [censored] up". you short wynn when you get home. if this isn't insider trading, where do you draw the line?

[john kane]

im doing a insider trading training programme today. fwiw so far has confirmed 1) is definitely no becuase:

"inside information is not of the competitor's shares, thus the person is just acting on a hunch"

edit: not saying this is better than what has already been said, just doing this training reminded me of this thread.

[Rotating Rabbit]

[ QUOTE ]
[ QUOTE ]
1) Yes
2) Yes
3) Yes

in every circumstance you are privy to information that is not public knowledge. when you act on this information you are committing insider trading.

[/ QUOTE ]

for those of you saying #3 is insider trading, what if you go play blackjack at the wynn with your gambling addict friend, who loses, and on your way out he says something like "[censored] man, i hate this place, i'm gonna blow this [censored] up". you short wynn when you get home. if this isn't insider trading, where do you draw the line?

[/ QUOTE ]

With the example you give, the line is drawn at the definition of MATERIAL. And in such cases the law nearly always refers to 'in the opinion of a reasonable person with expert knowledge in finance/relevant area'.

Its obvious to say, but it must be both NON PUBLIC and MATEIRAL.

In both David's #3 and that example the information is certainly non public. David's #3 says he overhears every day for a week, and CLEARLY believes the story since he notifies the FBI, which means that as a reasonable person he felt it was MATERIAL. In your example, no reasonable person could, given the information, believe a man having a bad day was actually going to blow up a huge casino, it is NOT material. So your example is clearly not inside trading.

The trick comes in defining what is material for a 'reasonable person'. But these two examples obviously fall either side of this hard-to-define line.

And as for the CFA 'always' including a more extreme wrong (but reasonable) option etc, this is true if by 'always' you mean 'occasionally' !

[pig4bill]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
1. Favorable clinical trials at my company haven't been announced yet. So I can't buy the stock. But I short a competitor's stock.

2. I'm at a pay phone and I overhear the president of IBM lamenting the surprisingly bad earnings for this quarter as he speaks to the chairman on the neigboring phone. I short IBM.

3. I hear two apparent terrorists in the neigboring booth at a restaurant talk about throwing a bomb into the Wynn casino every day for a week. I notify the FBI but I also short the stock.

[/ QUOTE ]


you are using material nonpublic information to make bets on the market. are you dumb, this is all so cut and dry insider trading.... you understand that the idea behind insider trading is that you abuse the system and take advantage of NONPUBLIC information.

[/ QUOTE ]

So how come most of the people on this thread are saying 2 and 3 are almost certainly NOT insider trading? Since they have more knowledge of the subject than me, and since I am dumb for not realizing that all three cases are clearly insider trading, then the only possible answer to my question is, "they are imbeciles".

[/ QUOTE ]

Because it's not "information", it's hearsay.

[Shoe]

Others have nailed the points in question pretty good in this thread. I think the real question that remains is this, what did you hear at the poker table? Specifics are required in this situtation to determine if it is insider trading or not (Usually, if you just overhear a conversation it is not insider trading). Unless one of your examples are an exact match to your situation, then it's a definite grey area. PM if needed.

Best Regards,

Shoe

[J.A.Sucker]

1. This is clearly insider trading. I'm in R & D and we have to be very careful about this. You'd also be in trouble if you told anyone else to short a competitor's stock.

2. Close, but probably yes. If you make any effort to overhear the conversation, such as bending in to listen, it becomes more clearly insider trading, but who's gonna prosecute you?

3. I don't think so.