New York - The Supreme Court has effectively made it illegal to trade stocks based on any corporate information that is not publicly available - no matter who you are.
Management and employees of a public firm are generally considered corporate insiders. The SEC considers these individuals to have a fiduciary duty to the company to refrain from using nonpublic information for gain. Hence, the law prevents not only trading themselves but from disclosing it as a stock tip to other individuals.
Under a theory known as "misappropriation theory," individuals who do not work for the company but are are entrusted certain information by a company may violate securities laws if they trade or disclose the information as a stock to others.
The SEC has also targeted individuals who are clearly third party individuals by trading on nonpublic information obtained from a corporate insider. Generally, the SEC tries to prove that the insider had breached his responsibility by making the disclosure and the person who benefited knew that it was nonpublic information.
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