Scenario (all hypothetical) - you’re an executive with McDonalds. McDonalds decides that it’s going to dump Coca Cola Products in favor of Pepsi products.
As an McD’s executive, you sell your Coke stock and buy Pepsi before the announcement. After the announcement, Coke’s stock drops and Pepsi’s rises.
Are you guilty of anything?
From my merchant bank experience in the UK, yes, that would be insider trading. You’d be trading shares on the basis of non-public information.
It’s rarely clear-cut and obvious, though, which is why my firm had a whole department (Compliance) dedicated to ensuring that none of the employees breached any of these kinds of rules.
I’m not so sure that it would be illegal to do so. The issue here is that the McDonald’s executive doesn’t have any fiduciary duty to the stockholders of Coca-Cola. Trading on the basis of non-public information is not, in and of itself, illegal. The question is: are you doing it on the basis of non-public information that you have a duty (either your own duty or one imputed to you through some relationship) to pony up?
But as pointed out by Paul, this is one of those areas that is quite murky, and my classes on it are now 20 years ago plus (making them somewhat out of date 
), so I wouldn’t go lay down large bets on the basis of my thoughts. 
You could well be right, DSYoungEsq. Maybe I shouldn’t have answered, since we tended not to worry about these things. That is, if we intended to trade anything at any time, we had to clear it with Compliance, so we generally saw it as their problem.
Which it wasn’t, of course, not really. I mean, I suspect (IANAL) that saying “But our Compliance people said it would be OK!” wouldn’t really impress the court.
I’m amazed by some things. Just last month my company announced second quarter earnings profits more than 20% higher than analyst expectations. The day before the announcement came out after hours trading drove the share price up $1.50 a share, more than 6%. This stock is not volatile, and there is almost never any significant after hours activity. Normal after hours price changes are only a few cents per share. Who was trading after close the day prior to the announcement, and why aren’t they being investigated?
Might shave a few years off the sentence.
Yeah, but I was hoping to take those Compliance bastards down with me. 
Well, except for Isabel. She was, er. Oh - GQ. Sorry.
Yeah, that Isabel, she’s certainly something!
That would be a very clear cut case of insider trading. the scale and if it was noticed by regulators would determine if any action would be taken.
Usually it would need to be pretty sizeable, maybe using leveraged options. Criminal prosecution usually entails a combo of a lot of money, being famous, proving the knowledge, etc.
insider trading os stealing from other shareholders and ot a victimless crime.
I spent 8 years in the biz in institutional related roles.
I’m a brokerage principal and if someone came to me and asked me that, I’d tell them they couldn’t do that. The information isn’t available to the general public.
One of my continuing education classes had a similar scenario. You were meeting with a client and you were handed the wrong coat which had papers with non-public information. You can’t use that information to trade on.
Judging from the SEC’s website, I’d agree with China Guy.
An excerpt from their website on a case (or cases) previously brought:
I don’t read anything in the brief summary that states a person has to have a fiduciary duty to anyone in order for it to fall under securities’ law. Indeed, the link states that friends, family members and other associates have been prosecuted, clearly they’ve no fiduciary duty to the shareholders