LP,
I believe this was the original scenario, as posted by Druss:
"Some Australian mining engineers checked the property BRE-X used for their gold claims and fraud before BRE-X made their claims. If one of them said "No way that property has gold" shorted it and posted his knowledge on the net. It is perfectly legal."
A safe assumption from a careful reader is that the Australian mining engineers work for, say, Company B, and have no employment/contractual relationship with BRE-X (Company A).
Here is how you turned around the tire situation:
"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."
Now, what you have done is set up a straw man, not originally contained in the hypo, so you can knock it down. Now the tire guy WORKS FOR THE COMPANY, and has access to privileged, material nonpublic information, so of course this situation fits. But, if I may question, so what? Everyone knows that's a case of insider information. It's like positing an orange, and then declaring it's an orange.
But it is a given that the engineers were not employed by Company A, but rather by Company B, and their disclosure of "there's no gold in them thar hills" does not violate any duty owed to Company A (or Company B), it will not become privileged,material nonpublic information in terms of Company A.
If someone, through good investigative work, determines that the Clintons are about to propose a health care plan which would materially deflate pharmaceutical stocks, publishes his opinion before any other analyst that MRK, LLY, et al would be excellent shorts, that is NOT privileged (where is the privilege?) information, even though it is material and nonpublic. No insider issues.
If someone, through good investigative work and study of previous thermo-etc. maps, determines that pretty much all of OXY's leases are only going to yield water and nothing carbon-based, and publishes it on the Net, stating that shorting OXY is a no-brainer, that is NOT privileged (where is the privilege?) information, even though it is material and nonpublic. Let's say the company, CHV, publishes the information in its annual report that it's not willing to bid on leases #4007-4065 (the exact same leases which OXY is depending on!!) because its seismic/thermal work says there's no oil there at all, in fact it says there's less than zero chance of any hydrocarbons. Insider information? Where's the "insider"?
I don't think so, because your proposed rule interpretation would eventually absorb every bit of material information that the Company in question has not itself released generally to the public, no matter who the information belonged to. |
