united-states corporate-law finance securities insider-trading
Could leaking insider information eliminate insider trader concerns?
<p>Suppose I possess some non-public information about Company X. I want to trade Company X's stock for reasons unrelated to the information (e.g. I believe the stock market as a whole is going to tank soon and I want to get out of the market). This insider knowledge is preventing me from selling my shares of Company X. If I leak this information publicly and the information becomes widely reported, have I eliminated concern for being prosecuted for insider trading?</p>

<p>(For the purposes of the question, I am ignoring any legal or moral liability for leaking the information alone.)</p>

<p>No, because <a href="https://en.wikipedia.org/wiki/Insider_trading#United_States" rel="nofollow noreferrer">leaking is also a form of insider trading</a> if the person you leak to takes advantage of the information. Even if you leaked it in a public forum you still have to <a href="https://m.acc.com/legalresources/quickcounsel/InsiderTradingUS.cfm" rel="nofollow noreferrer">wait 6 months</a> before it is considered truly public knowledge, and by that time you might have learned something else.</p>

<p>If you think that Company X is going to be pulled down along with the rest of the market then your best bet is to short (or buy "put" options on) a representative basket of shares other than Company X. This has the advantage of being 100% legal without having to wait.</p>

<p>There is no general prohibition against using non-public information in making decisions about securities transactions. If as a home scientist you discover a flaw in some software where that flaw will cause the share price to plummet, or if you know that the CEO of some social media company has done something antisocial that is going to cause the company to go out of business, you can act on that information. There are special SEC restrictions on people in a position of trust with respect to publically held companies, hence as CEO if you know the company is going to collapse in a week, you can't legally dump your stock. </p>

<p>In any case, you can always make this information public, and avoid any possible prosecution for securities fraud. You might, however, be sued for violating a non-disclosure agreement, if you have one with the company and breached it.</p>

<p>Yes, under US law, once information is public and particularly once it is widely known, it is no longer "insider" information, and trading in the stock/security will not be insider trading based on that info.</p>

<p>However the legal penalties for intentionally leaking the info might be quite significant, depending on the exact circumstances. </p>
