What is considered insider trading?

[IamDavid]

We supply a very large company with 90% of it's product so we are pretty much in bed with the company. Does that mean I'm not allowed to use my insider knowledge for gain? We/I know extremely important details.

 

[her209]

FPMITAP

 

[Crusty]

Most likely yes, talk to HR.

 

[novasatori]

first paragraph on WP should answer any question you have

 

[looker001]

you can't use information to your advantage that is not available to general public. So basic answer is NO, you can't use your inside information. Long answer is it depends on my first statement.

 

[FelixDeCat]

Insider trading is profiting from material non public information. I doubt you know something that is that big, so go for it. :thumbsup:

 

[IamDavid]

damn! i wanted to be rich... oh well, i'll keep playing the lotto.

 

[Jeeebus]

I'm not even allowed to buy any company's stock unless I get prior approval from the firm.

 

[paulney]

What I love is statements like 'we treat you as insiders', which translates to 'we screw you with blackout dates on stock trading, but you get no say in corporate decisions'.

 

[LegendKiller]

Originally posted by: paulney
What I love is statements like 'we treat you as insiders', which translates to 'we screw you with blackout dates on stock trading, but you get no say in corporate decisions'.

Being an insider has nothing to do with being able to influence corporate decisions. It is mainly possessing material non-public information. Material could mean anything and is undefined (so it can be broadly defined), but generally it's anything that could change a stock price materially. Non-public is anything that isn't widely available to investors. Combine the two and the answer is obvious.

There are also other tests, such as fiduciary responsibility, if you have one to the company being traded, then you could be held directly liable.

For example, if Paul works for Microsoft and finds out that the government is going to smack microsoft with an anti-trust suit and have a very strong case to win, but that info is not public, he cannot trade. However, if somebody overhears his conversation on the phone with another executive and trades based upon that info, might be able to get away with it. If Paul tells his brother-in-law, the BIL might be able to get away with it.

Insider trading laws are very convoluted and not very well defined, for obvious reasons. The best application of logic would be that if it LOOKS bad, don't do it. First off, even if you're found innocent, you've made your company look bad in the market even a little bit. Second, you've showed people you can toe the line and not worry, which makes you look like you really don't care about the appearance.