Hi Wayne,
Yeah, that's the big part of the difference made: the agency/principal nature of ensuing transactions. Institutions that trade on selectively disclosed financial information do so for clients - not proprietarily - and theoretically do not benefit materially or directly from the information they're privy to.
Also, insider trading contemplates the illegal use of nonpublic information to gain or avoid loss which one is privileged to by nature of position - and, whether the information is material based upon a "reasonable man" test. Selective disclosure contemplates the "semipublic" (by invitation or qualification) release of information which may or may not be material to entities which the issuer and its' agents deem "worthy," or deserving, of such.
Now, with regard to institutions (broker dealers, etc) and their own, internal research departments: a while back, there was a practice of institutions loading up their proprietary (inventory) accounts immediately preceding the issuance of internally generated report(s) that could reasonably have been considered as material in terms of the effect on the issue(s) in question.
When the SEC looked into these as fairly blatant instances of insider trading, the response from many of these firms was that they were merely preparing for retail demand following the positive effects of the report(s) by stocking up beforehand (my pun, not theirs).
This argument was not accepted by the regulators, and from it followed the so-called "Chinese Wall" and "grey list" doctrines utilized to prevent trading (or, on the other side, suspiciously timed research issuance) in certain securities which other areas of the firm may be dealing with or in.
LPS5 |
