Question

You work as a public affairs director for a small company that is traded on a public stock exchange. On Friday, your boss calls you into her office and tells you that she has received bad news – a new product that was supposed to "hit the shelves" on Monday is not going to be released because it failed some last minute safety tests. This product was highly publicized and the general public has indicated great excitement about getting the product. She asks you to draft the statement that will be released on Monday when the product delay is announced. When you return to your office, you make some notes at your desk, and then leave for dinner to clear your head so you can start working on the press release. While you are gone, a colleague stops by your desk to chat and sees your notes on the desk. That colleague, who owns stock in the company, immediately calls his stock broker and sells off his stock before the bad news is public. You and your colleague are arrested for insider trading. While you did not sell any stock to avoid a loss, you are charged with giving that information to your colleague. Explain whether or not you should be found guilty of insider trading.

Answer 1

The answer is: Not guilty of insider trading

Step-by-step explanation:

If we follow the case: United States v. Newman, 773 F.3d 438 (2d Cir. 2014), we can argue that insider trading only happens when the person who releases the non public information did it for improper purposes. This means that the alleged insider released information knowing that it would be used for illegal purposes.

In this case, if you were not aware that the information your colleague got from your notes was going to be used illegally, then you are not liable for his illegal actions.