Diligence or Insider Trading?

Back in the day, major trust banks had their own investment analysts. Some of our clients boasted that their guys didn't just sit around poring over financial statements. They got out in the field. Questioned management. Kept their eyes open.

Was traffic at the local McDonald's picking up?

Was the employee parking lot at the local GM plant becoming less crowded?

Those working for today's "expert networks" also ask questions and keep their eyes open. The tidbits they gather form "mosaics" that may yield actionable insights. But it's not like the old days, as Andrew Ross Sorkin explains in the NY Times.

Going into one Gap store and asking the manager how sales are going is no big deal. The Gap has more than 3,000 stores around the globe. "However, if you went store to store and managed to find out sales figures for 1,000 of them, you might have something closer to [inside] information."

After you read Sorkin's column, the question of what constitutes insider trading certainly doesn't look black and white. More like a mosaic.