Ethic - Nonpublic information


2A Material Non-public information

Members and candidates must be particularly aware of information that is selectively disclosed by corporations to a small group of investors, analysts, or other market participants. Information that is made available to analysts remains nonpublic until it is made available to investors in general. Corporations that disclose information on a limited basis create the potential for insider-trading violations.

Q: Is official analyst conference call a public disclosure? Thanks.

From the CFAI curriculum (book 1, page 61):

"Issue Press Releases Companies should consider issuing press releases prior to analyst meetings and conference calls and scripting those meetings and calls to decrease the chance that further information will be disclosed. If material nonpublic information is disclosed for the first time in an analyst meeting or call, the company should promptly issue a press release or otherwise make the information publicly available." So, yes, it looks most definitely as though an analyst conference call constitutes public disclosure and if Billy Bob Joe (the only analyst keen enough to dial in) learns about some unexpected result, he can trade without fearing the wrath of the regulator. This being said it is up to the company to take additional steps to ensure broadest dissemination of information and it is almost unthinkable for a publicly traded firm not to issue a press release in advance of an analyst call. Good luck, Carlo

What is “Non-Public” information?

Special case: Analysts’ Reports Some analysts’ reports cause prices to move when they are issued. So should these be released to the general public before clients? No. Clients can’t be punished for paying for research from a top-quality analyst. However, it is assumed that this analyst is not relying on material non-public information as the basis for reports and recommendations.

  • If only you know, it’s non-public.
  • If only you and one other person know, it’s non-public.
  • If only “a select group of investors” knows, it’s non-public
  • Information is only becomes public when it is released to the marketplace (e.g., in a press release)
  • But you can trade on information as soon as it becomes public. You do not need to wait until everyone reads their mail

Rogue Trader, I like your explanations for exactly what would qualify as non-public vs. public. Thanks for posting.