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Comment by jgalt212 | Hacker News Reader

sounds like they paid to acquire "material non-public information".

It sounds like perhaps you aren't familiar with the meaning of "material non-public information". I've found a lot of stuff by Matt Levine on the topic interesting.

Ex: https://www.bloomberg.com/opinion/articles/2018-10-15/inside...

The information that formed the basis of the report was public.

It’s only insider trading if the company is improperly using information to trade. 3rd parties can discover and trade on non-public information as long as they aren’t breaking other laws (ie, stealing information, bribing, etc).

The law is far more complex than you suggest, and I would strongly caution anyone in possession of material non-public information to consult a securities lawyer before proceeding to trade securities based on such information.

See, e.g., https://corpgov.law.harvard.edu/2017/01/18/insider-trading-l...

Your source largely agrees with what he said. That is, you must either misappropriate the information or obtain it from a deliberate breach of duty by an insider for the insider's personal benefit.

If you e.g. count trucks leaving a company factory and feel you know nonpublic information about the company's finances as a result, feel free to trade based upon this info.

If you can count trucks leaving a company factory without trespassing (e.g., from a public highway), then it's not "non-public" information. "Non-public" information isn't strictly a function of how widely the information is disseminated. If anyone could obtain the information without trespassing, then it's not "non-public."

It's not though. It's information derived from a publicly available source which is not quite the same thing as public information.

Often non-public information can be inferred through careful observation, aggregation, and analysis of public information or information that can be seen from a public location.

Or you can just see nonpublic information in public.

If you're at a restaurant and you see the CEO fighting with the board and then exclaim "I quit!!" --- knowledge that the CEO quit is material nonpublic information to the board. It must be disclosed in a specific way with securities filings. They cannot trade based upon it until there is public disclosure.

You, however, can do what you want.

Let's take your restaurant example further. Suppose a Wall Street Journal reporter were also dining at the restaurant, saw the conversation going on, and then published a story about it. Would it be "nonpublic information" then? (Of course not.)

Then we have to ask ourselves, what made the information transition from nonpublic to public? Was it the publication by the newspaper? If so, what makes it different (other than the number of outsiders who know about it) than the information that was once held by a smaller group of outsiders, namely, the other people who were at the restaurant at the time?

> Suppose a Wall Street Journal reporter were also dining at the restaurant, saw the conversation going on, and then published a story about it.

This is explicitly considered by the SEC. Indeed, from their guidance on the matter-- read the last clause ;)

Of course, note this states "include" for recognized channels of distribution; there are other means by which information can become public. But "can be found out by the public" and "are broadly disseminated to the securities marketplace" are different standards.

> All information about the Company is considered nonpublic information until it is disseminated in a manner calculated to reach the securities marketplace through recognized channels of distribution and public investors have had a reasonable period of time to react to the information. Generally, information which has not been available to the investing public for at least two (2) full business days is considered to be nonpublic. Recognized channels of distribution include annual reports, prospectuses, press releases, marketing materials, and publication of information in prominent financial publications, such as The Wall Street Journal.

Also note-- e.g. your buddy Tom who has signed a nondisclosure agreement tells you that they loaded 50 trucks full of product today-- if you trade upon this you are probably committing insider trading because the information was misappropriated.

But your friend Bill who was sitting outside the factory on public land watching the loading can trade upon it freely.

You can't trade upon it until Bill's news story has been out for 2 full business days, because you already know the material nonpublic information by virtue of it having been misappropriated.

That material you quoted is not actually published SEC policy, nor is it law - it's a corporate policy that was published by TherapeuticsMD, Inc. and distributed to their internal shareholders, and included as part of a 10K filing. It provides a very conservative description of insider trading designed to keep folks at a safe distance from any activity that could be plausibly construed as such. If I were in their shoes, I might use the same definition - but that doesn't mean it's the same as the law. :-)

Yah. Sorry for that. Just grabbed something quickly on mobile.

You're right in that 'nonpublic' information isn't really defined and there isn't real SEC regulation or even a whole lot of case law about it.

I think we can probably agree that

A) there are things that someone outside the company without unlawful assistance or misappropriation could figure out and use in trading

B) while someone within the company and knowing the same things based on their privileged role could not yet lawfully using in trading, because they have not been widely disseminated and are considered nonpublic information.

Yes, I think that's a fair conclusion. More case law on this subject has been centered around the relationship between the defendant and the company. In particular, does the defendant owe the company a _duty of care_, or, put differently, is the defendant _entrusted_ with protecting a company's secrets? If no, then typically defendants have not been held liable.

Sometimes the defendant isn't even the person who traded - it's been the person who tipped off the trader, and who gained some benefit from that trade. Where the trader is family or another close relationship, such benefit is often presumed in the law.

(Disclaimer: I am an attorney but this is not legal advice. Consult a licensed attorney in your jurisdiction.)

>I would strongly caution anyone in possession of material non-public information to consult a securities lawyer before proceeding to trade securities based on such information.

I would strongly caution anyone in possession of material non-public information to consult a congressman to conduct the trade on their behalf.

https://theintercept.com/2015/05/07/congress-argues-cant-inv...

(And yes, there have been reforms, but those reforms were later neutered).

I have and I do. There are nuances, but it’s a false perception that me reverse engineering a trade secret and then using it for financial gain is inappropriate.

I suggest you consult a securities lawyer before giving advice to others to consult security lawyers.

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