Fluther: What's the difference between insider trading and a hot stock tip?

What's the difference between insider trading and a hot stock tip?

Asked by janbb (62878

) August 7th, 2017
10 responses
“Great Question” (3

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If a relative tells you news about a company they work for and you buy stock based on it, is that insider trading?

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Topics: business, stock market

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Answers

Yup, if you use “confidential information” to trade stock it is insider trading.

If they don’t have “confidential information” it is not! It would be called a hot stock tip if you just like the relative.

Tropical_Willie (31128

)“Great Answer” (2

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Trading based on any information not freely available to every other trader is insider trading. Simple.

Lightlyseared (34626

)“Great Answer” (2

)

What info you have @janbb you can pm me..)

imrainmaker (8380

)“Great Answer” (5

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A relative “who works for a company” may not necessarily be “an insider”. That is, a general rank-and-file (non-management) employee with no special fiduciary responsibility, no duties connected with strategy and planning, no other special knowledge, say, of major orders, company buy-out, etc. is not “an insider”. The CEO or CFO, on the other hand, or members of the Board of Directors are prima facie “insiders”. Between those ranks, though, say “middle managers”, supervisors, people who work in Planning, Purchasing or Sales may or may not be insiders. That’s a gray area.

If the news has been announced to rank-and-file employees, for example, that the company is being sold to another firm, or that a major order has been received, or that a company shake-up is going to occur – or any other “special news” which has been announced to rank-and-file employees or to the public at large, then that is not at all “insider” information.

CWOTUS (26102

)“Great Answer” (3

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Trading based on use of “material non-public information.” is insider trading.

A hot stock tip is based on expectations that are public. For instance, Myokardia Inc (MYOK) was known to be close to releasing a Stage 2 trial report on a drug for treating heart disease. I have had trading requests cross my desk for the last month. Today the news broke before the opening; the stock is up $14.65 to $31.85. (I am prohibited from trading in issues like MYOK).

zenvelo (39430

)“Great Answer” (2

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No. Insider trading would be if the relative told you something the company was keeping confidential.

marinelife (62485

)“Great Answer” (1

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5 to 7 years.

stanleybmanly (24153

)“Great Answer” (1

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and where’s Martha when we need her??

Strauss (23627

)“Great Answer” (2

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Just don’t forget, @Strauss, that Martha wasn’t put into the joint for “insider trading”. She did time for “lying to investigators”, or in a word: perjury.

CWOTUS (26102

)“Great Answer” (1

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