Insider trading due to mis-sent email?

Question

Something that happened to a friend recently. This friend is in charge of negotiations for company A. An individual from company B, accidentally sent my friend minutes from a recent meeting outlining a lot of information that can be useful for my friend in company A during the negotiations. Naturally, if he were to use information it could be construed as insider trading (a rather serious offense).

A point of interest is that in the email from company B a disclaimer was attached stating the usual: "if this went to the wrong sender then don't read it, only intended for internal use, blah blah."

Now two points I found interesting, and correct me if I am wrong: the disclaimer isn't legally binding e.g. there is no two-party consent - its one sided. Secondly, one could assume a perfectly ethical individual would not have looked at the email any further after understanding what the contents of that email contained, should they have not noticed that it was not intended for them.

Thus, my question. Say company A and B were negotiating on a price. Company's B minutes state on the first line of the email that their max price is 100. Company A was willing to sell for 70. My friend, having read the first line may not choose to act on the information in the document so as to avoid insider trading, however, it is hard to deny the fact that having read that document he will negotiate differently at even a subliminal level. It's like in poker, you know the other persons hand through a reflection in the mirror. Would my friend be acting in an illegal manner?

Full disclosure: this is for my own curiosity. My friend is already consulting the companies lawyer, and informed company B of the email.

Answer 1

First of all, this is not insider trading: insider trading is using non-public information to trade a publicly tradable security.

What this could be is misuse of confidential information - a civil tort. The disclaimer does not create a legally binding contract for a number of reasons but it does alert the recipient that the information is confidential: if they use it then they can be sued for damages (probably successfully).

However, given the nature of the information, it is almost impossible for your friend not to act on it and Company B should realise this. Legally he is doing the right thing, consulting a lawyer and informing Company B of its colossally massive stuff up. Ethically he may need to withdraw from the negotiations.