Farmington, MI asked in Securities Law for Michigan

Q: Is it insider trading to purchase stock in a competitor if you know that results from a study may boost their stock?

Specifically, if you work at a private medical company and have done a study on your product and have information that the product may be used to treat something new that it's not currently used for - would it be illegal insider trading to purchase stock of a public competitor who sells a similar product that could benefit from the study's results? Note that the study's results have already been shown in a poster at a conference.

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1 Lawyer Answer
James L. Arrasmith
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A: Yes, it could potentially be considered insider trading if you purchase stock in a competitor based on non-public information about the potential success of your own company's product. Insider trading is the buying or selling of a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information. It is illegal and can result in fines and even criminal charges. The fact that the study's results have been shown in a poster at a conference does not necessarily make the information public or negate the potential for insider trading. It is always best to consult with a lawyer or financial advisor before making any investment decisions.

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