I don't think this is accurate (in the US), and very dangerous advice if you are wrong.
Not only does it contradict every post-hire training I've ever sat through, but Martha Stewart didn't go to prison for the fun of it-- she was a recipient of insider information three or four degrees removed from the source. It was very much illegal for her to use other people's insider information.
The standing definition is that if you are trading on knowledge not available to the public regardless of how it was sourced or laundered, it's insider trading. I'd genuinely like to see any references you have that can attest to this more lenient interpretation-- it seems entirely self-defeating.
> Martha Stewart didn't go to prison for the fun of it-- she was a recipient of insider information three or four degrees removed from the source. It was very much illegal for her to use other people's insider information.
Martha Stewart went to jail for lying to the Feds, not insider trading, IIRC.
> It’s legal to use other people’s insider information. It’s only when you’re the source directly or indirectly that it’s illegal.
This is dangerously incorrect in the US.
You may not use ANY material business information that is not available to other traders.
Now, you may do your own analysis of the business or the market and act on that. You can hire private investigators to dig through public trash to monitor pizza consumption and act on that. You can even use public web APIs to calculate actual customer acquisition numbers (shady, but probably just on the technically legal side of the line) and act on that.
But, if you have any information about a company not generally available to the public, you may not act on it.
The “manipulative and deceptive devices” prohibited by Section 10(b) of the Act ( 15 U.S.C. 78j) and § 240.10b-5 thereunder include, among other things, the purchase or sale of a security of any issuer, on the basis of material nonpublic information about that security or issuer, in breach of a duty of trust or confidence that is owed directly, indirectly, or derivatively, to the issuer of that security or the shareholders of that issuer, or to any other person who is the source of the material nonpublic information.
The list is long but not total. If you happen to overhear something at lunch one day that’s fair game. The chain can be long and thin but it needs to exist. Aka A lawyer who’s client is the husband of an accountant for a company trying to do a takeover and your out of luck. Now it’s safer to shorten that to non public information = off limits, but not accurate. https://www.americanbar.org/content/dam/aba/administrative/l...
‘The Court, however, determined that, for a tippee to be liable, “the insider personally [must] benefit, directly or indirectly, from his disclosure.”35 In the Dirks case, the insider who provided the confidential information did so to expose a fraud in the company, not for any personal benefit. Therefore, the Court held, the insider had not breached his duty to the company’s shareholders, so the defendant (tippee) in Dirks could not be liable for insider trading.‘
