Ethics Question: Mosaic Theory additional, management, software

Londonrocks

Hey guys, I’ve come across a question that has me puzzled. Please take a look.
Question:
Jeremy LeCroy is a compliance officer with Overton Securities. He is in a bar when he overhears an acquaintance that he knows is in the IT Department of a local software company complaining about problems with the comany’s new database management program. Because LeCroy is a shareholder of the company, this concerns him. He goes on the internet to do additional research and finds that the problem has been widely commented upon by bloggers. As a result, LeCroy sells his stock the next morning. Is this a violation of the standards
a) No. Because LeCroy learned about the info in a bar (which is a public place), the information is by definition in the public domian
b) No. Although LeCroy first heard about the information from a material, non public source, he verified it from sources in the public domain.
c) Yes. LeCroy overheard a private conversation – by definition this is material, nonpublic information.
The correct answer is “B”.
My rationelle is this:
“A” is wrong because it doesn’t matter where you hear what you hear, or see what you see, that classifies it as public or private information.
“B” is iffy in my eyes because it says clearly he is in posession of material, non public information, which you are forbidden to act on, or cause others to act on.
The mosaic theory lets you use public information and nonmaterial, non public information to reach a conclusion. So if the information he got in the bar is from a material nonpublic and the material he got off the blogs to confirm everything is public… then by definition what he heard in the first place wasn`t material nonpublic information, it was just public information.
“C” is wrong because the information is not material nonpublic just because its overheard in a private setting.
Is this tricky, or am I looking to far into this?

sabre

“B” is iffy in my eyes because it says clearly he is in posession of material, non public information, which you are forbidden to act on, or cause others to act on. ”
__________________
It is a tricky question (and my guess is it is from Schweser), but I think the key is that the information was actually public information, he just first heard it from a nonpublic source. But again, focus should be that the information was not “nonpublic” when he heard it, so mosaic theory is not really applicable here.

YouCanDoIt

Thanks for your input.
It’s actually from a prep course I’m taking through the University of Toronto. So long and the short is, this was never material nonpublic information to begin with since it was all over the net in blogs – it was just public info and mosaic theory doesnt apply. It’s in the public domain, he can act on it.

ninja1024

make sense….. key point here is:
He goes on the internet to do additional research and finds that the problem has been widely commented upon by bloggers

jacksparrow

It isnt tricky. B is clearly correct because the information may be material, but it is NOT non public.

Analti_Calte

I would say C is correct.
“widely commented upon by bloggers” is Public . But rumors.
Bar is a public place but the information is both material and nonpublic as in not widely disseminated.
For Jeremy Lecroy it was a kicker that confirmed he had to act. In the absence of the bar conversation , he might not have acted on “rumors” , but this was an insider revealing inside information that is material

WarrenB1

the information is PUBLIC because its everywhere on blogs. There is NO information given that leads you to believe that they are rumors.