Mosaic theory and nonpublic material

anyone can use an example to explicitly explain it ? thanks

I am analyzing BMW. I go to a car show and hear that convertibles are not in this year. Talking to a few industry specialist, they say that Jeeps are going to be the best buy next year. I go to BMW’s website and see that all they are selling next year are Convertibles. I go to BMW’s dealership and see a large amount of inventory in the parking lot. I am using non material, non public info. And i Recommend a Sell. — Pretty much I am not using any “insider” information. I am putting things together from various public sources, and experience. If I was to overhear the CEO of BMW say, we are screwed next year, then I wouldn’t be able to use the MOSAIC theory

You can combine your existing research with non-public non-material information under the mosaic theory. You can never use non-public material information.

thanks matori.so it would not be violated if you just use those public resource?

Nope. Using your knowledge, experience, research etc… that does not include information that is confidential,insider, etc. is fine. Overhearing CEO’s and so forth is a violation.

I think a M&A with two companies is very possible because of strategic drivers both would want to improve. If I go to a restaurant a see a CEO of firm X with the CEO of a possible M&A firm and I recommend selling. Is it Mosaic Theory?

I dont think so. You would not have a reasonable basis for your recommendation. Maybe they just talk about everything but a merger or are just two people having dinner…

You wouldn’t have reasonable basis for a recommendation other than stating that based on your analysis, there would be strategic drivers for the companies to merge.

However, you could trade on what you saw and it would still be okay from an ethics standpoint.

Just something random, when people get caught insider trading they use mosaic theory as their defense.