Suppose I possess some non-public information about Company X. I want to trade Company X's stock for reasons unrelated to the information (e.g. I believe the stock market as a whole is going to tank soon and I want to get out of the market). This insider knowledge is preventing me from selling my shares of Company X. If I leak this information publicly and the information becomes widely reported, have I eliminated concern for being prosecuted for insider trading?

(For the purposes of the question, I am ignoring any legal or moral liability for leaking the information alone.)

3 Answers 3


No, because leaking is also a form of insider trading if the person you leak to takes advantage of the information. Even if you leaked it in a public forum you still have to wait 6 months before it is considered truly public knowledge, and by that time you might have learned something else.

If you think that Company X is going to be pulled down along with the rest of the market then your best bet is to short (or buy "put" options on) a representative basket of shares other than Company X. This has the advantage of being 100% legal without having to wait.

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    While leaking in a manner that someone else trades on would be insider trading, if the leak were made to the Wall Street Journal, for example, and the reporter didn't trade on that information (which I think is what the question contemplates), then it wouldn't be a violation. Also, the six months is a rule of thumb most often applied to thinly traded stocks like those on the OTC, and not a hard and fast rule. If it is on national TV and the front page of the WSJ or other business newspapers, and concerned a company that was part of the Dow, a week might very well be sufficient.
    – ohwilleke
    Feb 7, 2019 at 19:58

There is no general prohibition against using non-public information in making decisions about securities transactions. If as a home scientist you discover a flaw in some software where that flaw will cause the share price to plummet, or if you know that the CEO of some social media company has done something antisocial that is going to cause the company to go out of business, you can act on that information. There are special SEC restrictions on people in a position of trust with respect to publically held companies, hence as CEO if you know the company is going to collapse in a week, you can't legally dump your stock.

In any case, you can always make this information public, and avoid any possible prosecution for securities fraud. You might, however, be sued for violating a non-disclosure agreement, if you have one with the company and breached it.

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    It is worth noting that insider trading rules apply only to publicly held companies regulated by the Securities and Exchange Commission. There are no insider trading rules in the same sense for closely held corporations.
    – ohwilleke
    Feb 7, 2019 at 19:59

Yes, under US law, once information is public and particularly once it is widely known, it is no longer "insider" information, and trading in the stock/security will not be insider trading based on that info.

However the legal penalties for intentionally leaking the info might be quite significant, depending on the exact circumstances.

  • how is "public" defined in this context? Leaking information from the internal sales network to the affected company's intranet (all employees)? Or leaking into a backwater of the internet that has 1 visitor a year? Leaking it to a main newspaper?
    – Trish
    Sep 21, 2020 at 15:31

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