Can you trade based on non-public info if you're not an insider?

From this article:

Normally something like this would be covered under insider trading laws. But these researchers aren’t “insiders” at the company, so do the same laws apply?

A similar but different situation would be if you worked at the DOJ before they filed the anti-trust case against Microsoft. You could short-sell the stock on your information, before it goes public, and make money. Is this illegal?

IIRC, you need not be a bone fide insider at the company to be guilty of insider trading. If you are trading based upon information that is not available to the general public and that information, if and when made public, would affect the value of the stock, the you just participated in insider trading.

Recall the movie Wall Street. Charlie Sheen’s character finds out information on an airline. They are about to be exonerated in any wrongdoing by the FAA in a plane crash the year prior. Charlie’s character trades based upon that information, even though it won’t be made public until the next day. That is insider trading, even though he is a stockbroker and doesn’t work for the airline.

Yup, that is illegal. You can read more information here:

Ever read the news about Martha Stewart?

“Insider” in this case means someone with access to “inside” information, not neccessarily someone inside the company.


As a budget analyst, I am an “insider”, which means I have certain windows that I can trade shares of my company in. 30 day period after quarterly earnings press releases, basically.

But even when the window is open, if I have information that not everyone else has, I cannot trade.

This would apply to ANYONE, whether they are normally considered an “insider” or not. If you know something that the general public cannot access, that is insider information, and you have effectively become an “insider” by possessing that information.

Yes it is illegal. As Duckster pointed out it is what happend to poor little Martha Stewart.

Then why isn’t poor little Martha sprucing up cellblock D?

Because the wheel of justice grind slowly.,2933,77217,00.html

How is it determined how some piece of information would affect the value of the stock? Is this up to the decision of whoever resolves the case?

E.g. : Suppose I make wool for a living. I sell a big order to company XYZ (NYSE: ABC) for their new style of wool coats (which haven’t been announced yet). If I buy stock in XYZ because I think the new coats will make them more money, is that insider trading? Or would it have to be proven that the new product is significantly likely to turn a profit?

I think it would be more of a problem if you bought stock in your wool company before the big sale was announced.