Mosaic theory

can someone explain this to me? tnx

under the mosaic theory, when an analyst comes across nonpublic nonmaterial info and combines it with other analysis that then causes the information to become material, the analyst can use the information to trade. under no circumstances can you use material nonpublic information. for example, if you are at your local grocery store and you overhear a shopper talking about this revolutionary energy drink that is being developed by a company called xyz and then you go home and research it and combine it with other analysis, you can use the info. this might be a crappy example but i hope it gets the point across.

its basically the ability for an analyst to make a recommendation based on piecing together different bits of non-material, non-public information obtained during the due dilligence process.

So what happens if an analyst see’s two CEO’s (i.e. Jerry Yang and Steve Ballmer) in British Airways first class club chatting and getting along. Then he goes home does some research and figures out that a merger between the two would make sense based on his analysis. Just to confirm, this is not an example of Mosaic theory, right? The information must be nonpublic as well as nonmaterial. Since this relates to a merger/tender offer it is considered material, correct?

Seeing two people in a plane is just not MNPI. It’s not material because it’s not even about a security, it’s not really non-public because they are on a commercial flight, and it’s not even information. It’s not mosaic; it’s just nothing. Yang and Ballmer are a pretty extreme case because it’s hard to believe the two of them could be buds. The general case though is that CEO’s can be buds and chat at the club without you worrying about whether you’ve just come in touch with MNPI.

The source of the information is important. For a shopper thats mosaic. For the CFO and CEO, if you use the info you break the Standard

Suppose company A is publicly known for searching for potential targets. Suppose you see several investment bankers meeting numerous times at an exclusive local country club with the CEO of company A and the CEO of one of a rival company. Do you consider it non-material?

I consider it material that the CEO of A is such an idiot that he meets with investment bankers and the CEO of a potential takeover target in a public place.

for me it is material too, but not for Schweser So as it is material I thought this could not be used under the Mosaic Theory. Any opinion about that?