Expert Network Compliance: MNPI Rules & Best Practices

Expert networks have become indispensable for hedge funds, private equity firms, and consulting companies seeking proprietary market intelligence. But as their use has grown, so too has regulatory scrutiny, making expert network compliance increasingly important. Over the past decade, the SEC and DOJ have brought dozens of enforcement actions tied to expert network calls, resulting in insider trading convictions, nine-figure fines, and shuttered funds.

The stakes are high. Compliance failures in expert network engagements don’t merely create legal liability, but they destroy reputations, unwind careers, and can end firms. Yet most investment professionals lack a clear, practical framework for managing this risk.

This guide provides exactly that: a comprehensive breakdown of MNPI rules, red flags to watch for on expert calls, and the best practices that protect both your firm and your experts.

1. What Is MNPI and Why It Matters for Expert Networks

Material Non-Public Information (MNPI) is information that (a) a reasonable investor would consider important in making an investment decision and (b) has not been disclosed to the general public. Trading on MNPI, or tipping others who trade on it, constitutes insider trading under U.S. securities law.

Expert networks create a specific MNPI risk because they systematically connect investment professionals with industry practitioners who may have access to sensitive information about publicly traded companies. An expert who currently works at, or recently departed from, a company in your investment universe could inadvertently, or intentionally, disclose information that meets the MNPI threshold.

The risk isn’t theoretical. Since 2010, the SEC has pursued over 200 insider trading cases. Many involved expert networks as the conduit for MNPI transmission. The expert network industry’s high-profile legal problems, most famously involving Galleon Group and Primary Global Research, resulted in criminal convictions and transformed the regulatory landscape permanently.

For expert networks, the MNPI question is particularly nuanced because the line between legitimate mosaic theory research and illegal insider information is not always obvious. Understanding where that line sits and building systems to stay clearly on the right side is not optional. It’s existential.

2. The Legal Framework: Key Laws and Enforcement History

Expert network compliance sits at the intersection of several overlapping legal frameworks:

• Section 10(b) of the Securities Exchange Act & Rule 10b-5: The primary anti-fraud provision. Prohibits using any deceptive device in connection with buying or selling securities. Trading on MNPI violates this rule.
• Regulation FD (Fair Disclosure): Requires public companies to disclose material information to all investors simultaneously. An expert who is a company employee and selectively discloses material information to investors may expose their employer to Reg FD liability.
• The Misappropriation Theory: Established in United States v. O’Hagan. A person can be liable for insider trading even without a direct duty to the company if they misappropriate information entrusted to them for securities trading purposes.
• FINRA Rules 2010 & 2020: Applicable to broker-dealers. Require just and equitable trading principles and prohibit manipulative or deceptive practices, including trading on MNPI.
• The Tipper/Tippee Doctrine: From Dirks v. SEC. Both the person disclosing MNPI (tipper) and the person receiving and trading on it (tippee) can be criminally liable, even if the tippee was unaware the information was obtained improperly.

3. Red Flags: When an Expert Call Enters Illegal Territory

Most expert calls are entirely legal and valuable. The risk is concentrated in specific patterns. Investment professionals and compliance officers should recognize these warning signals immediately:

• Currently employed at a target company: An expert who currently works at a publicly traded company you’re researching presents the highest MNPI risk. Their knowledge may include non-public information they’re contractually and legally prohibited from sharing.
• Recently departed from a target company: Former insiders retain MNPI obligations for some period after departure. “I just left last month” is not a safe harbor.
• Working in a role with earnings visibility: CFOs, controllers, VP of Sales, investor relations staff, and supply chain executives at public companies may have access to unannounced financial results.
• Claiming special knowledge of a pending deal: Any reference to unannounced M&A activity, partnerships, or financing is an immediate stop signal.
• Referencing specific, forward-looking quantitative data: “Our Q3 is going to beat by 15%” from someone with insider visibility is a paradigm example of MNPI.

4. What You Can (and Cannot) Legally Discuss

The mosaic theory, affirmed in Dirks v. SEC and widely applied in investment practice, holds that an analyst can legally combine multiple pieces of public information, industry data, and expert opinion to form an investment thesis, even if the resulting conclusion is highly accurate.

Mosaic theory allows expert calls to be genuinely valuable without being illegal. An expert can legally share their industry perspective, experience from prior roles (with appropriate time gap), and analysis of public information. The expert cannot share what they know from their current role at a publicly traded company regarding material, non-public matters. So what are the perissinble expert knowledge categories?

• Structural industry dynamics: Competitive moats, supplier power, distribution channel economics, and regulatory barriers, all based on general industry experience
• Technology assessment: Evaluation of products, technologies, or platforms based on technical expertise
• Management evaluation: Assessment of leadership quality, strategic execution, and operational culture based on direct experience with the management team in prior contexts
• Go-to-market validation: Expert judgment on whether a company’s stated strategy is executable given industry realities
• Customer and market sizing: Industry-based views on addressable markets and buyer behavior patterns
• Regulatory and political risk: Expert analysis of policy trajectories based on public information and domain expertise

One of the most misunderstood aspects of expert network compliance is how long MNPI obligations persist after an expert leaves a company. There is no single bright-line rule, but general guidance includes:

Ongoing obligations: Information remains MNPI until it is publicly disclosed by the company, regardless of how long ago the expert received it. A former CFO who learned of an unannounced acquisition two years ago cannot legally share that information if it remains non-public today.

Practical decay: For operational information like quarterly sales trends, the practical MNPI risk diminishes significantly once several earnings cycles have passed.

Trade secrets vs. MNPI: Note that confidentiality obligations from employment agreements may restrict what experts can share even when the information is not technically MNPI.

5. Best Practices for a Compliant Expert Network Program

A robust compliance program for expert network usage operates at three levels: pre-call preparation, during-call protocols, and post-call documentation and review.

Pre-Call Best Practices

• Verify expert employment status: Confirm the expert is not currently employed at a publicly traded company in your investment universe. Use LinkedIn, SEC filings, and your network provider’s screening to validate.
• Review expert’s restricted list status: Cross-reference the proposed expert against your firm’s restricted trading list. If you hold or are considering a position with their employer, additional scrutiny is required.
• Prepare a structured question guide: Establish clear interview questions in advance. Questions should be designed to elicit opinion, analysis, and historical context, not current non-public data.
• Obtain written compliance attestations: Require your expert network provider to confirm that each expert has signed compliance agreements attesting that they will not share MNPI.
• Notify legal/compliance of high-risk calls: For calls involving recently departed executives from portfolio companies or acquisition targets, notify your compliance department before the call.

During-Call Protocols

• Open every call with a compliance reminder: Briefly remind the expert at the start of the call that they should not share material non-public information.
• Monitor for specific non-public data points: If an expert begins citing specific company figures, customer names with performance data, or unannounced corporate events, interrupt and redirect immediately.
• Do not ask leading questions about current performance: “Is [Company X] going to beat estimates this quarter?” is a question designed to elicit MNPI. Avoid it entirely.
• Record or transcribe calls where permitted: Many compliant firms record expert calls for compliance review purposes. Verify expert consent and applicable recording laws by jurisdiction.
• Terminate calls that enter MNPI territory: Have a clear internal protocol for ending calls when red flags emerge. A terminated call with a documented reason is far better than a completed call with problematic content.

Post-Call Documentation

• Create contemporaneous call notes: Document key insights, the expert’s employment background, and specific topics discussed within 24 hours of the call.
• Submit to compliance review queue: Implement a systematic process for compliance officers to spot-check expert call notes and recordings.
• Maintain call logs centrally: All expert call records should be retained in a central compliance database for at least three to five years.
• Flag unusual disclosures for immediate review: If a call produced information that may meet the MNPI threshold, escalate to senior compliance counsel immediately. Do not trade pending resolution.

6. Evaluating Your Expert Network Provider’s Compliance Standards

Investment firms bear regulatory responsibility for the expert call process, but your expert network provider’s compliance standards are your first line of defense. A provider with weak compliance protocols creates exposure that no amount of firm-side diligence can fully mitigate.

When evaluating an expert network for compliance quality, ask these questions:

• Expert attestation process: Does every expert sign a compliance agreement before participating in calls? What does that agreement cover? Is it updated periodically?
• Employment screening: How does the provider verify expert employment status and identify conflicts with publicly traded companies in client portfolios?
• Call monitoring: Does the provider monitor or audit calls for compliance red flags? What triggers an audit?
• Expert training: What training do experts receive on MNPI obligations? Is it documented and recurring?
• Restricted list integration: Can the provider cross-reference proposed experts against your firm’s restricted securities list before scheduling calls?
• Incident response: What is the provider’s process if an expert discloses potentially material information?
• Regulatory history: Has the provider been named in any regulatory actions or client lawsuits related to compliance failures?

A compliant expert network provider will welcome these questions and provide clear, documented answers. Evasiveness or inability to articulate a compliance program is itself a significant due diligence finding.

7. Incident Response: What to Do If MNPI Is Disclosed

Despite robust protocols, MNPI incidents can occur. The firm’s response in the first hours after a potential MNPI disclosure can determine whether a compliance issue remains manageable or becomes an enforcement action. So what are the immediate steps (to take within 24 hours):

• Halt all trading in the relevant security: Immediately impose an internal trading halt on the securities of any company whose MNPI may have been disclosed. This step is non-negotiable.
• Notify your Chief Compliance Officer: Escalate the incident to your CCO immediately. Do not wait for the end of the trading day.
• Preserve all records: Do not delete, overwrite, or modify call recordings, notes, or any other documentation related to the call. Issue a litigation hold if appropriate.
• Notify the expert network provider: Inform the provider of the incident so they can take appropriate action with the expert, including suspension from future calls.
• Engage outside counsel: For anything beyond a clearly minor incident, engage outside securities counsel immediately. Attorney-client privilege begins from first contact.

8. How Infoquest Approaches Compliance

Compliance is not a checkbox at Infoquest, it is a foundational element of how we source, screen, and facilitate expert engagements. Firms working with us can expect the following as standard practice:

• Pre-engagement expert screening: Every expert is screened against client-provided restricted lists and assessed for current public company employment conflicts before any call is scheduled.
• Mandatory compliance attestations: All experts sign a detailed compliance agreement before participating. The agreement explicitly covers MNPI obligations, confidentiality requirements, and the prohibition on disclosing employer-specific non-public data.
• Custom sourcing model: Unlike database-driven networks that simply match keywords, our custom sourcing approach allows us to specifically exclude experts whose current roles create compliance risk for a client’s situation.
• Client compliance integration: We work with client compliance teams to understand firm-specific requirements and restricted lists, integrating this into every expert sourcing request.
• Specialist GCC coverage with compliance rigor: Our Middle East and GCC market specialists undergo the same compliance protocols as all experts, ensuring regional coverage doesn’t compromise compliance standards.
• Rapid turnaround without compliance shortcuts: Our 2-hour expert list turnaround does not bypass compliance screening, it reflects efficient process design, not reduced diligence.

Investment firms increasingly choose Infoquest not only for market coverage and pricing, but because our compliance infrastructure reduces the risk they assume on every call.

Conclusion: Compliance Is a Competitive Advantage

Expert networks deliver genuine, legal, and high-value intelligence to investment firms every day. The firms that thrive in this environment are not those that avoid expert networks out of compliance fear — they are those that have built robust protocols enabling them to use expert intelligence consistently, confidently, and defensibly.

A compliant expert network program requires investment: in process design, in compliance infrastructure, in provider selection, and in ongoing training and monitoring. That investment pays for itself many times over, both by protecting the firm from catastrophic enforcement risk and by enabling the kind of deep, differentiated research that drives returns.

The question is not whether expert networks can be used compliantly. They can, and they are, by the best-run investment firms in the world. The question is whether your firm’s program reflects the standards required to operate in today’s regulatory environment.