finance is-x-legal securities insider-trading
Insider Trading
<p>In Australia there are two major grocery companies, Woolworths and Coles.  Now suppose I work for Woolworths and I become aware of a technological breakthrough that will dramatically increase the popularity and profitability of Woolworths which has yet to be publicly announced.</p>

<p>Obviously I cannot trade Woolworths shares using this knowledge to profit.  However assuming I have no inside knowledge on the competing company Coles, am I able to legally trade (in this case sell) Coles shares using my knowledge of Woolworth's recent development?</p>

<p>More generally, if I have inside knowledge on one company in a particular industry, could this prevent me from trading any company in such industry?</p>

<p>Trading is <strong>not</strong> only purchasing stock expecting it to increase in value. <strong>Trading also involves shorting a market (planing on a stock falling).</strong></p>

<p>What you are describing, would <em>still</em> be trading based on knowledge the public does not have. Just because it's not trading the company you are employed at, that doesn't <em>not</em> make it insider trading.</p>

<p>Trading on non-public information is not, per se, illegal.</p>

<p>There are many statutes and regulations that attempt to restrict or outlaw "trading on insider information," but those are not only fraught with ambiguity but also subject to a great deal of criticism.  This is a subject of ongoing debate, as well as frequent regulatory and statutory revision.  (<a href="https://en.wikipedia.org/wiki/Insider_trading" rel="nofollow">Start researching it for a taste</a>....)</p>

<p>"Trading by insiders" is tightly regulated, but it is still legal for insiders to trade while aware of non-public information.  (It would be virtually impossible for them to liquidate their equity if no such mechanism existed.)</p>

<p>In the example you give:</p>

<ol>
<li><p>You are not legally an "insider" just because you work for a company.</p></li>
<li><p>If you obtain "material non-public information" and you attempt to profit from it in the securities market, you <em>might</em> be subject to prosecution regardless of whether you are an "insider."</p></li>
</ol>

<p>In practice: Because this a contentious, poorly-defined, and often-politicized matter, you should obtain legal advice before trading on questionable information ... or even communicating it to others!  Institutional investors typically retain lawyers for this purpose.  And even that isn't enough to keep them out of court and regulatory proceedings, where everyone is still trying to figure out what the rules are.</p>
