Mosaic Theory: Scuttlebutt Method

Definition of Mosaic Theory Mosaic Theory defined as a research approach whereby the analyst arrive a conclusion by piecing the information that available in public. It included the insider information, which the information is yet to be disclosed, is considered as material and non-public information. Mostly the insider information is discovered by the analyst themselves before the invention from any parties. Insight is gained from the companies and profit earned from insight by using Mosaic Theory. It is important for analyst to keep the record about how they discover the insider information and ways they did the analyses. Mosaic Theory also been called scuttlebutt method. It is the method recognized by the CFA Institute for means of analysis

Proponent views this method as common sense and it is a orderly approach to collecting relevant information and make decision whether stock issued by certain company should be recommended as investment. Quality of data collected are given emphasis as information are gathered from different resources and data may include verifiable information that is available for uses of public or latest news that just released. Data also might be a rumor or hearsay that is currently circulating upcoming event associated with product line, leaderships or other aspect that could influences the issuing company. Type of information obtained should take into consideration as it must protecting client to making poor decision that could result in loss of profit or money. While, critics of uses of Mosaic Theory stated that information that collected may create a situations where there is some concern about the ethical use of non-public data as data is gained from public and some information that not yet released into public also been taken into assessment. Critics note that since the information are haven’t available for general public, a money manager or analyst should avoid taking non-public information into

Beside, analyst would receive market-moving material and they should beware of Insider Trading law when receive those material. Insider Trading is the trading of a company stock or securities by individuals with access to material or non-public information. It usually associated with both legal and illegal conduct. The legal version occur when corporate insider such as officers, directors, and employees buy and sell stock within their own company. Illegal insider trading refers as buying or selling securities in breach of fiduciary duty, trust and confidences while holding the material and non-public information about the securities. Violation of insider trading may include ‘tipping’, such ‘tipping’ information, person who ‘tipped’ trade the securities and securities traded by those who misappropriate