In the process of conducting equity research, what constitutes valid 'Mosaic Analysis' as opposed to illegal use of Insider Information?

[ A ]Obtaining unpublished draft quarterly financial results directly from the company's statutory auditor before board meetings

[ B ]Bribing corporate executive assistants to obtain confidential merger acquisition documents

[ C ]Synthesizing non-material public and non-material non-public pieces of information from diverse operational sources (suppliers, store visits, macro data) into a comprehensive analytical conclusion[ CORRECT ]

[ D ]Trading on secret board resolutions whispered by the company CEO during an informal golf game

Takeaway

Option C is correct: Synthesizing non-material public and non-material non-public pieces of information from diverse operational sources (suppliers, store visits, macro data) into a comprehensive analytical conclusion

Derivation

Mosaic theory is a recognized, legitimate analytical method where a research analyst gathers multiple pieces of non-material public information and non-material non-public data (e.g., supplier interviews, freight volumes, footfall traffic, scrap rates, macro reports) and pieces them together to form a unique, material research insight. In contrast, trading on selective, material unpublished price sensitive information (UPSI) obtained from corporate insiders constitutes illegal insider trading. This tests legal research methodology. The common error is confusing mosaic synthesis with trading on leaks.

Why the others fail

A — Obtaining unpublished draft quarterly financial results directly from the company's statutory auditor before board meetings

Obtaining unpublished draft quarterly financial results represents clear illegal possession and use of material UPSI.

B — Bribing corporate executive assistants to obtain confidential merger acquisition documents

Acquiring confidential merger files through illicit channels is a criminal breach of SEBI Insider Trading Regulations.

D — Trading on secret board resolutions whispered by the company CEO during an informal golf game

Trading on confidential executive disclosures prior to public dissemination is a textbook definition of illegal insider trading.