Would This Count as Insider Trading?
This is a completely random thought.
Since you have to trade on "material non-public information" for something to count as insider trading would the following count?
Let's say you are working for a streaming platform like Netflix, Paramount, etc. and has access to account information. You know someone that works at a aircraft manufacturer that is publicly traded, and he's been developing a supersonic aircraft that would drive up their stock price significantly if they are successful.
Since these streaming platforms keep track of your location you access their platform from through IP addresses (hence why they flag you with a warning page when you use a VPN), you were following this person's access log and IP address.
From the streaming platform's user data, you notice that he has traveled cross country within the span of two hours, from two distinct IP addresses. You've done some cross checking and found he weren't using a VPN service. He could've been sharing his account with someone, you determine its worth the gamble, and buy stocks of this aircraft manufacturer.
Couple weeks/months later, the company announces the supersonic aircraft project was a success and is actively looking into commercialization. Stock shoots up, you've made money.
Would this scenario above count as material non-public information? Or would it count as a way of doing research creatively? I used an example of a streaming service, but if its any company that provides services and collects IP addresses of specific users, wouldn't this be possible to capitalize on somehow?
Based on the most helpful WSO content, the scenario you described would likely count as insider trading. Here's why:
Material Non-Public Information (MNPI): The key factor in insider trading is whether the information used to make a trade is both material and non-public. In this case, the information about the supersonic aircraft project being successful and the potential stock price increase is clearly material, as it would influence an investor's decision. Additionally, the information is non-public because it has not been disclosed to the market.
Misappropriation of Data: The method of obtaining the information—using IP address logs from a streaming platform—could be considered a breach of confidentiality or misuse of proprietary data. Even though the information was not directly related to the aircraft manufacturer, it was derived from private data that you had access to through your employment. This could fall under the misappropriation theory of insider trading, which prohibits trading on information obtained through a breach of duty or trust.
Creative Research vs. Insider Trading: While creative research is a legitimate practice in investing, the line is crossed when the information is obtained through unethical or illegal means. In this case, using private user data from a streaming platform to infer material information about a publicly traded company would likely be deemed unethical and potentially illegal.
In summary, this scenario would likely be considered insider trading because it involves trading on material non-public information obtained through a breach of trust or misuse of proprietary data.
Sources: Robinhood in IB, Modern Insider Trading - Food for Thought, You Best Not Miss | The Daily Peel | 10/20/22
no such thing as random thought.
ive thought about stuff like this, like having a dude in a cabin posted up near a cobalt mine in utah or something with binoculars writing down number of shipments coming out for the quarter.
then you'd trade the mining co's stock based on numbers your binoculars dude gives you
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