Information is material if there is a substantial likelihood that a reasonable investor would find it important in making an investment decision by having significantly altered the total mix of information available. While the government applies a backward-looking test in assessing materiality, the key here is that there is no bright-line rule, and materiality depends upon the totality of the circumstances.1
Examples of material information include, but are not limited to:
- earnings and dividend estimates;
- significant product developments;
- major changes in management;
- public offerings;
- significant litigation or government investigations; and
- significant transactions such as corporate takeovers, mergers, tender offers, joint ventures, or purchases or sales of substantial assets.
Information is non-public if it has yet to be disseminated broadly to the marketplace (e.g., via a press release or analyst report) and has not yet permeated the proper channels. Information is generally not considered to be public until it is fully internalized by the market (i.e., until the price of the security has fully adjusted). Trades may be considered suspicious if made during the week following a disclosure.2
1 See TSC Indus. v. Northway, Inc., 426 U.S. 438, 448-50 (1976).
2 See Chiarella v. United States, 445 U.S. 222, 228 (1980).