a guy in a tire shop or a wrecking yard sees an inordinate number of Firestone tires come in on Ford Explorer wrecks. He dials up the Yahoo Firestone Board (assuming one exists) and writes, "Not only is the rubber hitting the road, it's hitting the shoulder, the Yield signs and trees nearby, because these tires are functioning worse than retreads on a 18 wheeler. Not only am I changing my tires but I'm shorting the stock."
Naturally this scenario wouldn't fall under 10b-5. A high incidence of a specific brand of tire ending up at a dump would hardly be considered privileged information, and specifically doesn't satisfy the nonpublic requirement. First, any individual who would seek to gather such information could (there are dumps and trash heaps everywhere). Also, the person owning/running the trash dump has no obligation to any particular vendor whose products wind up there. Finally, and as a contributing factor, there are no special pains taken by a dump owner (other than a fence) to safeguard such information, which goes toward proving that such information is not of a sensitive nature, and is not intended to be nonpublic.
Now, if the individual was working at a tire production plant, and got an internally-generated memo stating that the company was going to stop producing the tire due to impending, not-yet-disclosed legal issues and traded off of such, that would clearly fall under 10b-5. The information is privileged, and meets the material and nonpublic tests.
Such as it is with the engineers' mining survey; information which the engineer is privileged to know and have access to by virtue of his advantaged position, and at the same time information which is not publically available and could be reasonably considered to have an impact on the stock price if and when released. Trading off of information in this scenario is indisputably illegal.
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