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Comment by perl4ever | Hacker News Reader

I don't think there's any law against using material non-public information unless it's illicitly obtained. This is a frequent theme of Matt Levine's Bloomberg column that's often mentioned on HN.

Why would anyone ever trade unless they had material non-public information? The point of having markets is so such information becomes public through prices, isn't it? Conversely, if you don't have it, you're purely gambling aren't you?

"Not legal advice" though.

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If you trust Wikipedia, this is the first sentence in the US section on insider trading: "Until the 21st century and the European Union's market abuse laws, the United States was the leading country in prohibiting insider trading made on the basis of material non-public information."[0]

I'm not a lawyer, nor do I work in finance, but I think the key is what exactly constitutes "non-public information." I can trade on all the public information regarding Tesla's cars, like reviews, published production numbers, and Elon's tweets and my own analysis of all tat but not on the word of a someone who works there saying they've got some big unexpected news.

There's a bunch of interesting cases about whats on the edge, for example, commercial satellite imagery to count cars in parking lots[1].

[0]: https://en.wikipedia.org/wiki/Insider_trading#United_States_...

[1]: https://www.theatlantic.com/magazine/archive/2019/05/stock-v...

No, material and nonpublic is necessary but insufficient for the trading to be illegal. It must also break a confidentiality agreement, fiduciary duty or specific law pertaining to the way the information is released to the person and their duties thereof.

This is to say that it's illegal for congresspeople to trade on material, nonpublic information because there is now a law explicitly governing it. If they (or anyone) develop the material, nonpublic information through original research, it's not illegal.

Don't trust Wikipedia summaries for these things.

Do you have a good source to recommend with a more detailed overview?

Read the SEC documentation on insider trading directly. Barring that, Matt Levine gives accessible (and entertaining) which is informative for a lay audience.

>illicitly obtained

No such stipulation. I'm not allowed to trade my company's stock based on information I acquire through performing my standard everyday job duties.

That is because the actual stipulation is for there to be a confidentiality or fiduciary agreement. As shorthand, "illicitly obtained" could therefore be replaced with, "illicitly appropriated."

On its own, material and nonpublic information is fine to trade with. Likewise not all insider trading is illegal; most of it is explicitly legal and mundane.

You can't defend against insider trading accusations by saying "I had insider knowledge but I didn't base my trades on it". Therefore your statement implies that you can't trade your company's stock at all. However, it is an empirical fact that companies sometimes offer it as an option in the 401k plan, which seems like an endorsement that it's ok in some situation.

Nonpublic information about, say, a merger, would be "illicit" in my understanding. But what if you have worked for a company for 10 years and you think management is really great?

You can be guilty of insider trading for not buying something that you'd otherwise have done, too. So if you worked for a company and found it a terrible place to work and therefore never bought company stock, or sold the stock you had, you would in fact have profited from material nonpublic knowledge. Obviously that can't generally be a crime.

Of the public companies I've worked at, all had insider trading policies and it was stressed repeatedly there will be legal repercussions. You are allowed to trade yes, but only during open trading windows, typically following an earnings report.

I think most public companies make sure that upcoming earnings data and such is only released to people on a "need to know" basis. It doesn't seem reasonable that thousands of employees would have access to it.

Plenty of data is shared internally with rank and file. Netflix for example openly shares (internally) subscriber numbers, which is a critical piece looked at during the earnings report.

> But what if you have worked for a company for 10 years and you think management is really great?

This is exactly why they say material non-public information. This is not material. It is your opinion, and you can trade on it during applicable trading windows.

My public company has trading blackout windows close to earnings reports forbidding everyone from trading, non-public information or not. Outside those, you’re still not allowed to trade if you are in possession of material non-public information. If you are an executive, that basically means all the time which is why they’re required to file scheduled sales long in advance. It doesn’t matter if you “do not use it” for your trades — that’s not going to hold up with the SEC.

> You can be guilty of insider trading for not buying something that you'd otherwise have done, too.

This doesn’t sound legitimate.

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