Is this insider trading?

My friend told me that their dad's (public) co. stock has skyrocketed, and when I asked if they were celebrating, they told me not yet because they don't think it's done. If I buy the stock now, is that insider trading?

Saint Petersburg, FL -

Attorney Answers (2)

Jed R Prest

Jed R Prest

Business Attorney - Orlando, FL
Answered

Insider trading is the trading of a corporation's stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the company. In most countries, trading by corporate insiders such as officers, key employees, directors, and large shareholders may be legal, if this trading is done in a way that does not take advantage of non-public information.

However, the term is frequently used to refer to a practice in which an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise in breach of a fiduciary or other relationship of trust and confidence or where the non-public information was misappropriated from the company.

Based on these facts I would have to say no. The fact that the stock has skyrocketed is public knowledge. The fact that they think the rise will continue to grow is speculation. Now if he was giving to information that is not public knowledge and

Adam Troy Rauman

Adam Troy Rauman

Business Attorney - Clearwater, FL
Answered

Based on the facts you have provided, if you buy the stock it would not be insider trading. As the other attorney stated, the fact that the stock has increased is public knowledge. Thinking it will continue is speculation.
That being said, if you friend told you something that is not public knowledge, i.e. the company is going to be purchased by a competitor at a much higher price, and you were to act on the information, you may be in violation of the law. Insider information is information that only upper management at a company has which has not been released to the public. This information may be positive or negative. Insider trading is when management acts on non-public information.

This answer is provided for informational purposes only, does not constitute legal advice, and does not create an... more

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