Does insider trading exist for land or property assets?

Question

Insider trading is defined as "the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information" and is illegal pretty much everywhere to make stock markets more fair.

Are there similar restrictions for the trading of land or other property assets?
For example, lets say I own a railway company and want to build a station in a sparsely populated, imaginary county called Notrainsville. If I buy a lot of land in Notrainsville super cheap, announce my plans to build a station and start construction, and then sell it for a much higher price (cuz the station makes it worth more money). Is this illegal?
Another example: Lets say I'm friends with Elon Musk and in casual conversation, he mentions that he found an asteroid with $5 trillion worth of diamonds, which he plans to mine. Of course, this would hugely deflate the value of diamonds so I sell all the diamonds that I own for investment purposes immediately. Is this illegal?

Answer 1

The terminology is different, but there are analogous concepts that aren't about shares in publicly traded companies. Jurisdictions generally have laws designed to resolve / prevent "conflict of interest". There is a big section of Washington law that regulates ethics in public service. Therefore, the Chief of the Washington State Patrol cannot award a contract for new vehicles to himself, because "No state officer or state employee may have an interest, financial or otherwise, direct or indirect, or engage in a business or transaction or professional activity, or incur an obligation of any nature, that is in conflict with the proper discharge of the state officer's or state employee's official duties". The Attorney General could not unload his real estate holdings in area X, knowing that his office was initiating a legal proceeding that would make such land worthless (using confidential knowledge), but once fact is made public, he can act on that knowledge.

Your specific hypotheticals do not involve SEC regulations or public officials. You may sell all of your diamonds if you think the bottom will fall out on the diamond market, indeed people do this all the time (and are often wrong about the future). People often buy land because they have a reason to believe that it will become valuable (e.g. they heard a rumor about a business expanding into the area); many people invested in micro-computer companies because they got the idea (even from people who has specific technical knowledge) that microcomputers would become very popular. The closest you will get to an "insider trading" concept for stuff (not shares) is the local conflict of interest laws, which are about government officials acting on their knowledge and power as government officials.

Answer 2

"Insider trading" laws are far less stringent for land and property assets than for stocks, because the former are traded infrequently. The intent of those laws is to prevent people from "day trading," based on rumors, because stocks are, in fact, traded every day.

Even in securities law, the issue is one of "fiduciary duty." The issue is not that "insiders" aren't allowed to trade. Instead, they are prevented from profiting from "day to day" (rather than long term) fluctuations in the price of the stock. For instance, company executives usually aren't allowed to trade shortly before before a company earnings announcement, but they are allowed to trade after the announcement, when the playing field is considered "level." This duty extends not only to the executives themselves, but their spouses, children and friends, and business counterparties (even a printer), basically anyone they hope to see again.

On the other hand, if you were sitting on a plane, train, bus, and you overheard "random" company executives talk about a takeover, and traded on that information at your own risk, you have no fiduciary duty to refrain. (I'm assuming that you don't know the executives and have no hopes to see them again.)

If you are representing a train company building in Nowheresville, the COMPANY can buy all the land that it wants to, develop it, and profit from it, even selling off some of it for subdivisions. The fiduciary issues come it at the point where you are buying for yourself personally, as opposed to for the company. In that case, you might be hurting the interests of the company. Then you should formally obtain permission of the company, represented by its Board of Directors, before buying land for your own account. The company lawyer might put out a notification, or even formally ask permission from the other shareholders for you to buy land for yourself in this way.

Answer 3

The offense commonly called "insider trading" in the United States arises under federal securities laws. Real estate is not generally a security.

The only time real estate would have something akin to the situation of insider trading, whether there would be a duty of disclosure that wouldn't implicate a simple first party fraudulent concealment or fraud law, would be when property is owned by a REIT, but even then would apply to REIT shares rather than the real estate itself, or in a sale of ownership interests in a single asset entity that owns only the real estate.

Many states require a variety of disclosures about real estate when it is sold, however.

For example, in Colorado, there is a duty to disclose a variety of defects on a standard real estate commission form, in addition to the common law requirement in a sale of a "used" piece of real estate (as opposed to a newly constructed residence) to disclose any latent defects not detectable by a reasonable physical inspection of the property that are known to the seller. In the sale of a newly constructed residence, there is a warranty implied in law that the property is free of defects which may not be disclaimed by mutual agreement.