You do not have to trade on MNPI to get sanctioned for it

A CLO and hedge fund adviser paid a $1.8 million civil penalty for MNPI control failures tied to borrower information. No proof of illegal trading. The controls were the violation.

That is the part people miss. The SEC does not need to show you traded on it to sanction you.

For context on the other end of the spectrum: in the Primary Global Research case, the SEC charged hedge funds and portfolio managers with trading on MNPI obtained from public company insiders moonlighting as expert network consultants, alleging more than $30 million in illicit profits. The SEC never banned expert networks. It went after how information was controlled.

Where MNPI actually enters a fund

Most problems are not rogue traders. They are uncontrolled inflows nobody mapped.

• Expert networks: a former employee describes an unreleased roadmap
• Bankers and sell-side: deal pipeline details
• Board seats and observer rights: early access to earnings
• Customers and suppliers: a supplier reveals a major order cancellation pre-earnings
• Alternative data vendors: telemetry that isolates a single issuer
• Informal channels: conference side chats, WhatsApp threads

Alternative data is the underrated one

It looks safe in aggregate. Sliced, it is not. App usage isolating one public company. Web-scraped pricing at granular levels. Geolocation tied to store traffic before earnings. The SEC has flagged three failures specifically: no evaluation of whether the data could be MNPI, no diligence on data origin, and no monitoring for data drift that turns a previously safe feed into a risky one.

Restricted list triggers worth writing down

• An expert on the call still holds unvested RSUs
• NDA-bound deal discussions begin
• A signed LOI involves a public buyer
• A pending merger is under discussion

Cross-border

If you invest in the EU or UK, MAR inside-information regimes apply and carry their own insider-list requirements. Map which rules apply to which entity.

Examiners routinely request multi-year expert call logs, personal trading reports for access persons, restricted list histories and communications samples. Your call notes are exam material whether you treat them that way or not.

Honest question: how many of you log every expert call with the issuers named? Or is it still "call happened, notes are in a doc somewhere"?