Your example is not correct. Insiders in companies are specifically designated people. Top executives and anyone with access to material non-public financial information.
Just being an employee does not make you an "insider". I regularly traded in the company I worked for. I did not have access to any financial information, so it was all based on my hunches of how sales were doing.
There's nothing illegal about that.
Moreover, you are not in violation of insider trading laws just for knowing insider information. You have to have received it from someone you knew was violating their insider status, or compensated them for such. For example, if you overhear someone in a bar talking about their sales numbers, and you trade on that - you are not guilty of insider trading.
> An “insider” is an officer, director, 10% stockholder and anyone who possesses inside information because of his or her relationship with the Company or with an officer, director or principal stockholder of the Company. Rule 10b-5’s application goes considerably beyond just officers, directors and principal stockholders. [1]
> This rule also covers any employee who has obtained material non-public corporate information, as well as any person who has received a “tip” from an Insider of the Company concerning information about the Company that is material and nonpublic, and trades (i.e. purchase or sells) the Company’s stock or other securities" [1]
The formal Insider Trading Policy applies to any person who has the information, for the purposes of this law Insider ( as defined in the first part) is materially same.
While you are half right that they are not "Insider" the law does not differentiate any person who got the information from the "Insider", so they are still a insider from the SEC regulations PoV and law applies to them if they trade on material non-public information obtained from a "tip".
An “insider” is an officer, director, 10% stockholder and anyone who possesses inside information because of his or her relationship with the Company or with an officer, director or principal stockholder of the Company. Rule 10b-5’s application goes considerably beyond just officers, directors and principal stockholders. This rule also covers any employee who has obtained material non-public corporate information, as well as any person who has received a “tip” from an Insider of the Company concerning information about the Company that is material and nonpublic, and trades (i.e. purchase or sells) the Company’s stock or other securities.
This policy also applies to your family members who reside with you, anyone else who lives in your household, and family members who do not live in your household but whose securities transactions are directed by you or are subject to your influence or control, as well as trusts or other entities for which you make investment decisions.
It's absolutely treated as insider info by policy where I work. It might not rise to SEC enforcement action, but if caught you probably won't have a job anymore...
i don't mean to sound dogmatic but the source I cited does explicitly say that the "insider" does not have to work inside the company specifically but rather just be privy to non-public information.
Unless you can find another citation that contradicts my point then I'm going to have to assume my point is correct. And I say that welcoming a correction in the name of "science" :)
I know it's hard to miss but if you look closely, insider trading has the word "insider" in it. Meaning people inside the company (typically those with the material nonpublic information you're talking about) are specifically not allowed to trade in their stocks using that information. I hope for your own sake you work at a private company.
Yeah, along the same lines, the actual definition of insider trading is a lot narrower than people think, there's interactions that would be insider trading if it came from the CEO, but is not insider trading if it comes from a guy who overheard the CEO on the phone in a coffee shop or something. Multiply that by thousands of employees with "sensitive" information having unguarded conversations that they're perfectly allowed to have, and there's a lot of information out there.
Insider information is "details about a company's plans or finances that are not yet available to the shareholders".
If you overhear employees talking and you have no relation to them except you're in proximity, that's typically not insider info.
https://www.investopedia.com/terms/i/insiderinformation.asp
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