As far as I understand (note: I'm not a US practitioner, but I've done courses based on US realities) you don't have a legal obligation not to act on what you overheard, but if you're any kind of investment professional committed to market integrity, it'd be ethically unsound.
I think it depends whether you have any other professional connection to the deal - rival, broker, etc. If you're totally unconnected, then no, you've done nothing wrong, although the person you overheard probably did.
I'm not a professional in this field myself though, so I'm guessing from my experience of business confidentiality in other fields.
On a related note: have you sen the final episode of Season 3 of Mad Men? A similar, though not identical, issue arises.
Though rules changed since Mad Men times - in the last decade especially things got amazingly strict. Basically the way things work is that after each big, headline-grabbing fraud of some kind, rules are instituted against this particular kind, forcing people to be inventive again...
That's not so - for example, Martha Stewart's insider trading conviction was for acting on pre-public information from a friend who worked for ImClone. Of course, if a public company was "about to buy" another public company and not just considering making an offer, that would already be public information anyhow, due to regulatory requirements, SEC involvement, and so on, making the OP's scenario not insider information in any case.
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I'm not a professional in this field myself though, so I'm guessing from my experience of business confidentiality in other fields.
On a related note: have you sen the final episode of Season 3 of Mad Men? A similar, though not identical, issue arises.
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2) So: it's the nature of the information that provides the taint, not the vector(s) of transmission. Correct?
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I assume instide trading rules apply where one or both of the parties are publicly traded?
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