What is Material Nonpublic Information?
Material Nonpublic Information is information that would affect the market value or tradingSales and Trading Career ProfileThe sales & trading division (S&T) of an investment bank helps mutual funds, hedge funds, pension funds, etc. facilitate equities transactions (buy/sell). A career in sales & trading can be extremely strenuous with a very fast paced environment. The competition for positions is intense, compensation can be very high, of a security and that has not been disseminated to the general public. It is considered insider information.
Information is considered to be “material” if its dissemination to the public would likely affect the market value or trading price of an issuerCorporate InformationLegal corporate information about Corporate Finance Institute (CFI). This page contains important legal information about CFI including registered address, tax number, business number, certificate of incorporation, company name, trademarks, legal counsel and accountant.‘s securities (i.e. stockStockWhat is a stock? An individual who owns stock in a company is called a shareholder and is eligible to claim part of the company’s residual assets and earnings (should the company ever be dissolved). The terms "stock", "shares", and "equity" are used interchangeably.), or if it is information which, if disclosed, would likely influence a reasonable investor’s decision to purchase or sell an issuer’s securities.
Information is considered to be nonpublic when it has not been adequately disclosed to the general public. Information ceases to be material, nonpublic information only when it has been widely disseminated to the public or is no longer material.
What are examples of material nonpublic information?
Material, nonpublic information may include:
- An issuer’s intention to launch a take-over bid, auction, public offering, private placement, stock repurchase, consolidation, or split;
- A pending covenant default under an issuer’s (or one of its material subsidiaries’) credit facilities or trust indenture;
- A pending resignation or dismissal of one or more senior executives of the issuer or one of its material subsidiaries;
- A pending purchase or sale of a significant asset or business;
- Another issuer’s intention to commence a take-over bid or propose a merger involving the issuer;
- A pending significant legal or regulatory proceeding or settlement;
- A pending ratings change;
- A pending earnings release that is inconsistent with expectations.
What should you do if you have material nonpublic information?
Investment bankersInvestment Banking Career PathInvestment banking career guide - plan your IB career path. Learn about investment banking salaries, how to get hired, and what to do after a career in IB. The investment banking division (IBD) helps governments, corporations, and institutions raise capital and complete mergers and acquisitions (M&A). who come into possession of material, nonpublic information, regardless of the circumstances under which such information was received, must be extremely cautious in their use and disclosure of it. Furthermore, an investment banker should never personally benefit from any material, nonpublic information, nor may an investment banker disclose such information to others so that they may benefit personally from it.
Securities should be placed on a restricted listRestricted Trading ListSecurities are placed on a bank's restricted list when the bank is engaged with the company on non-public activity, such as mergers and acquisitions work, affiliate ownership, or underwriting activities or other distribution of the issuer's (the company's) securities. if the bank believes numerous employees have access to material information.
Investment bankers should always use code namesM&A Project NamesUntil an investment banking M&A transaction is publicly announced, investment bankers should always use an M&A project name in place of the actual company name. This helps maintain the confidentiality of the transaction and prevents any material nonpublic information from being disclosed when talking about unannounced transactions.
Additional information
Check out CFI’s resourcesResourcesFree resources to advance your corporate finance career. CFI's resource library includes Excel templates, interview prep, technical knowledge, modeling, section to learn more about corporate finance. Stand out from the crowd with financial modeling courses and finance certificationsCertificatesCFI certificates are a premier financial modeling and valuation accreditation for corporate finance professionals and financial analysts globally. Other relevant information includes:
- Managing conflicts of interestManaging Conflicts of Interest in Investment BankingManaging conflicts of Interest in investment banking. Conflicts of interest pose significant reputation and legal risks to corporate finance professionals. In investment banking, and M&A in particular, there is a higher risk of bad press and civil litigation than is the case with other areas of corporate finance
- Chinese WallChinese WallIn finance, a Chinese Wall (or a Wall of China) is a virtual information barrier erected between those who have material, non-public information and those who don’t, to prevent conflicts of interest. A bank uses a Chinese Wall policy to comply with securities regulations.
- Restricted trading listRestricted Trading ListSecurities are placed on a bank's restricted list when the bank is engaged with the company on non-public activity, such as mergers and acquisitions work, affiliate ownership, or underwriting activities or other distribution of the issuer's (the company's) securities.
- Project code namesM&A Project NamesUntil an investment banking M&A transaction is publicly announced, investment bankers should always use an M&A project name in place of the actual company name. This helps maintain the confidentiality of the transaction and prevents any material nonpublic information from being disclosed
