Chapter 5: Ethical Practices and Obligations - H. Use on Non-Public Information

Question 1

Nonpublic information

Answer 1

Nonpublic, or insider information, is any information that has not been disseminated to the general public. The following are examples of nonpublic records:

• Records obtained by the administrator in connection with an audit or inspection;
• Records in connection with a registration statement that may contain trade secrets or confidential information.

Question 2

Material inside information

Answer 2

Material inside information is defined as any fact that would have an effect on the value of a security in the marketplace. Regarding inside information, it is a violation of the USA for an agent to do any of the following:

• Effect any securities transaction based on material inside information;
• Make recommendations to either buy or sell a security based on material inside information; or
• Transmit material information in any manner to anyone who might trade a security based on the information.

An agent who has obtained material inside information should not disclose this to any person except to his or her supervisor.