The SEC recently filed an insider trading suit against Mr. Badin Rungruangnavarat, alleging that he bought thousands of options and futures for the stock of Smithfield Foods, Inc. on material nonpublic information in advance of the public announcement of Smithfield’s acquisition by Shuanghui International Holdings Ltd. SEC v. Ringruangnavarat, No. 13-cv-4172 (N.D. Ill.). Of particular interest, the Complaint does not specify what material nonpublic information Mr. Rungruangnavarat allegedly traded on, but only that “[a]mong other possible sources, Rungruangnavarat has a Facebook friend who is a former employee of the company where Rungruangnavarat works, and who is an associate director at the Thai investment bank that advised Charoen [another potential buyer] on its contemplated Smithfield bid.” Complaint ¶32. While more specific allegations will likely follow as the case develops, this allegation begs an interesting question—if a Facebook friend posts material information on Facebook, is it nonpublic for purposes of insider trading? Courts have defined information as nonpublic “until it has been disseminated in a manner sufficient to insure its availability to the investing public.” See US v. Royer, 549 F.3d 886, 898 (2d Cir. 2008); Dirks v. SEC, 463 U.S. 646, 653 n.12 (1983) (acknowledging SEC’s view that “disclosure of significant corporate developments can only be effected by a public release through the appropriate public media, designed to achieve a broad dissemination to the investing public generally and without favoring any special person or group.”). Whether or not the present case tests Facebook posts as nonpublic, the increasing ubiquity of social media outlets like Facebook and Twitter makes this question a likely issue to be considered and developed in future insider trading jurisprudence.
