How to tackle insider stock information?

I got a comment which talks of insider information and I have analysed the same critically so that one takes an informed decision.

Good Stocks Wrote:
Hi. Does anyone have recent news from Glenmark R&D? A friend of mine working for them told me that Eli Lilly is about to terminate its license agreement on the 6211 molecule. During a meeting in June, Lilly have pointed out issues on cardiovacular safety and CYP inhibition (CYP is an enzyme which takes part in the metabolisation of drugs). As a failure on these two criteria can lead to the termination of the agreement, Glenmark expects Lilly to raise the issue in the coming days.
I don't see anything about it on the internet, are they hiding this information? After the failure with Merck on Melogliptin (GRC-8200), this would be a disaster.
As 6211 and 8200 can be valued at 150 Rs together, I think a 450-500 Rs price would be more accurate than the current 700-800 targets, which seems to me very expensive.
As my friend is very reliable, I sold my stocks. What are you thoughts?

Good Stocks further wrote:
I have had a confirmation about Glenmark. They are indeed hiding the facts about Lilly/6211 agreement failure and giving good news about their new molecule entering Phase I, but are quite nervous...
I sold my stocks on time (about 630 Rs), they have been up to more than 700, but I suppose the price will fall to 450-500 when the story comes out...

1. I got this comment which has been given by a reader and speaks of insider information. It is difficult for me to authenticate the source information but I am posting a procedure against which an information and source should be cross checked to avoid falling trap to rumour mongering and falling prey to gullibility.

2. The method to be adopted for checking source and information  is listed below:
(a) Consider the relevance of the information.
(b) Consider the reliability of source or agency.
(c) Consider credibility of information itself.

3. I will dwell on each point deliberately so that the readers are able to avoid the common mistakes of falling prey to gullibility.

4. Relevance of the information can be determined by asking following questions:
(a) Is the information relevant to current scenario?
(b) Is info affecting other stocks also?
(c) Is information affecting globally?
(d) Has there been some smoke before the fire?

5. Check the credibility of information by asking following questions:
(a) Is the event or report possible?
(b) Does information correspond to the stock or to the industry in specific?
(c) Does information available is in agreement with information available through open source of information like Internet and various industry reports.
(d) Is the information corroborated by similar information from other source of information?

6. One should check the reliability of source and it depends on following listed factors:
(a) Your knowledge about the capability of the source.
(b) Is source reliable and has he/she been able to provide any stock specific report earlier also.
(c) Likely scope of  human or technological error in the information.

7. One can classify the reliability of information against an alphabetical scale and same can be listed as following:
(a) Completely reliable: A
(b) Fairly reliable: B
(c) Reliably cannot be judged: C
(d) Unreliable information: D

8. Similarly one can check the credibility of information by checking against the numerical scale as listed below:
(a) Confirmed: 1
(b) Likely: 2
(c) Truth can not be judged: 3
(d) Unlikely: 4

9. I have given an elaborate system of checking the information provided by source and if it is able to pass the test; please go ahead and trade the stock as per the available information as now onus lies on you to take the responsibility of your actions and one now can not throw the blame on the information provider.

Note: Remember insider information is leaked at times deliberately as an overall plan at the higher level where information provider and receiver are just like soldiers in a game of chess and they can be sacrificed any time for the over all interests of the promoters and big fishes.

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