Hi all,
I’m confused with the mosaic theory, I just don’t understand when we can use it and when we can’t?
Standard II (A) mentions that we cannot use material non public information, under no circumstances.
How can we distinguish material non public info that can’t be used and material non public info that can be used for the mosaic theory?
Thanks in advance!
Material nonpublic information may never be used. Never!
Mosaic theory deals with a combination of public information (material or not) and nonmaterial nonpublic information. It’s always OK to use nonmaterial nonpublic information. Always.
The key distinction here is between material and non-material non-public information.
You can use non-material non-public information, you can’t use material non-public information.
It’s covered in the Standards of Practice Handbook, but generally speaking non-public information is material if its release the public could reasonably be expected to move the assets price or a reasonable investor would want to know it before buying/selling/holding.
If you do a lot of ethics questions, when you get a question on mosaic theory and whether or not non-public information is material I’ve found it becomes almost second nature to decide, it just takes practice.
I didn’t know about the difference between material and non-material nonpublic information.
Thanks to both! I’ll pay attention to this the next time I come across a question like this 