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Inside information
Non-public material information
MNPI
What "material" and "non-public" mean
- Material — information a reasonable investor would consider important to the buy/sell/hold decision. Earnings ahead of release, mergers in negotiation, regulatory actions, major product news, board changes.
- Non-public — information not yet disseminated to the market through a press release, regulatory filing, news article, or other broad channel. Information shared with one analyst but not yet public is still non-public.
How MNPI reaches advisers
- Direct channels — board seats, advisory roles, expert networks, analyst calls.
- Indirect channels — communications with clients who are insiders at public companies.
- Inadvertent — overheard at conferences, accidentally received in mis-sent emails.
Required controls
Section 204A requires written policies and procedures reasonably designed to prevent misuse of MNPI. The standard elements:
- Information barriers (often called "Chinese walls") between functions that may have MNPI and the trading function.
- A restricted list — securities the firm cannot trade because of MNPI exposure.
- A watch list — securities under monitoring that are not yet restricted.
- Pre-clearance procedures escalating to the CCO when MNPI is suspected.
- Training and attestation for access persons.
What examiners look for
- Restricted-list and watch-list entries with documented reasons for inclusion and removal.
- Evidence the lists are being used — pre-clearance denials, blocked trades.
- Communications-monitoring program for emails and chats covering MNPI red flags.
- Personal-trading surveillance comparing access-person trades to the restricted list.
How StratiFi thinks about MNPI
MNPI risk is binary in consequence and probabilistic in occurrence. The firms that handle it well don't rely on training alone — they have an information barrier that's actually enforced, a restricted list that's actually checked at trade entry, and a CCO who reviews red flags as a routine part of the supervisory cycle.
Frequently asked questions
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Is information from an expert network MNPI?
It can be. The threshold is whether the information would be material to a securities decision and whether it has been disclosed to the market. Many expert-network calls touch on operational specifics that may rise to MNPI. -
What's a Chinese wall?
An information barrier separating functions that may have MNPI (e.g., investment banking, board representation) from functions that trade (e.g., portfolio management). The barrier includes physical, technical, and procedural controls. -
How quickly does information stop being MNPI after disclosure?
Generally after the information has been broadly disseminated and the market has had a reasonable opportunity to absorb it — typically considered to be after the start of the next full trading day. Short waiting periods after disclosure are still risky.