What is the term used for the legal use of security analysis combined with nonmaterial nonpublic information?

The term for the legal use of security analysis combined with nonmaterial nonpublic information is indeed the Mosaic Theory. This concept refers to the idea that investors can collect bits of both public and nonmaterial nonpublic information to form a comprehensive view of a security's value. In practice, this means that analysts may use various legitimate sources of information that do not directly authorize them to trade on nonpublic information, allowing for a nuanced analysis that is compliant with legal standards.

The Mosaic Theory supports the notion that as long as the information procured is non-deceptive and parts of it are publicly available or legally obtained, it can be assembled to create an analysis that reflects an informed understanding of a company’s potential. This practice is essential for maintaining investor confidence while ensuring compliance with regulations regarding insider trading.

Understanding this theory helps delineate between acceptable and unacceptable information use in financial analysis, thus serving as a critical framework within ethical standards in securities trading.