According to @nic__carter, a scenario was raised where confidential M&A documents uploaded to an AI chat are later surfaced as a stock pick, questioning whether trading on that output constitutes insider trading. Source: Nic Carter on X, Nov 24, 2025. Under SEC Rule 10b-5, trading on material nonpublic information obtained through a breach of duty is prohibited, which directly covers confidential deal information used for securities trading. Source: SEC Rule 10b-5, Securities Exchange Act of 1934. The misappropriation theory makes it illegal to trade using confidential M&A information taken in violation of a duty to the information source, even if the trader is not an insider of the target. Source: United States v. O'Hagan, 521 U.S. 642 (1997). A recipient of a tip can be liable if they know or should know the information was disclosed in breach of a duty and they trade on it for personal benefit or to benefit the tipper. Source: Dirks v. SEC, 463 U.S. 646 (1983). The communication medium, including AI chat systems, does not change liability, as insider trading laws apply regardless of how MNPI is transmitted or surfaced. Source: SEC v. Wahi et al., No. 2:22-cv-01009 (W.D. Wash. 2022) SEC complaint and Litigation Release No. 25446 (application of insider-trading theories to digital assets and modern communication channels). For traders, if an AI-generated recommendation plausibly originates from leaked, nonpublic M&A materials, trading on it with knowledge or reckless disregard of its MNPI nature can trigger liability under Rule 10b-5 and tippee liability standards. Source: SEC Rule 10b-5; Dirks v. SEC, 463 U.S. 646 (1983).