If you’re an analyst and you have throughly researched a company an done all appropriote diligence necessary and have come to the conclusion that the stock is extreamly undervalued and poised for a huge rally, if you would inadvertantly overhear executives of the target company divulge material nonpublic information that confirms your opinion, does that prevent you from purchasing the stock?
Shweser says yes. But I’m not convinced unless your purchase is solely or even partially based on the material non public information that you’ve acquired.
S2000, I like the reference. But outside of the eyes of God is this ethical?
To elaborate on my initial point however, This decision to invest has already been made. However, between the decision and execution non-public info was acquired that confirms decsion.
CFA states that states that mat. non-public info must not be used to formulate/influence investment decisions, however, in this case it is not being used to do either, it is simply known, all actions are based off of information known prior to acquisition of M/NP info.
CFA Institute’s general guidance is that when a firm possesses material, nonpublic information about a company, the securities of that company should be put on a restricted list: no trading. That general guidance doesn’t mention whether that information is used to determine whether, when, or how to make a trade; it says that if you have the information, don’t trade.
yes, you should not trade the stock. Now in the real world, if you traded it, and for some reason you were discovered that you overheard something, then it’s a battle of how much evidence do you have supporting your buy recommendation before you heard it.
But ultimately, given the hate these days, you’ll probably lose anyway.
Thanks Magician and OP for asking this question…