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I'm trying to understand what is considered "material" information held by an executive of a company. There is company information that an executive (say insider) will know that a public investor will not be privy to, but at which point does the information become material and at which point is the executive required to divulge the information into the public arena?

example: A mining company sends a rock to a lab to test it for gold. The company has stated that results will be announced in 4 weeks. The company obtains results (good or bad) from the lab after one week. They are now in possession of material information until the 4 week period they stipulated.

Additionally - I assume the lab is now considered an insider and cannot act on their information for profit. But this must happen all the time or is it very tightly controlled/regulated/respected?

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closed as off-topic by g g, olaker Jan 23 '14 at 13:41

  • This question does not appear to be about quantitative finance within the scope defined in the help center.
If this question can be reworded to fit the rules in the help center, please edit the question.

This question appears to be off-topic because it is a legal question not quantitative finance related – g g Jan 23 '14 at 12:57
up vote 1 down vote accepted

The CFA institute defines "material" information as information that would change the price of a security if it was released or that a reasonable person would want to know before making an investment decision. Non-Public information is information that is not available to the general public. That could include information that was released to only a select group of analysts.

In your example, the lab would be in possession of material non-public information. The legality of trading on that information is for a lawyer to answer, but it would be a violation of the CFA code of ethics.

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