True, there is no rule against hearing something, but there is a rule against an insider divulging non-public information to an outsider. It makes no difference if the tippee acts on it or not, it is the insider, the tipper, that has violated SEC rules by divulging this non-public information to an outsider.
The tippee can now not trade until that information has been made public or he will be guilty of insider trading. Had he heard this from a third party he could act on it, but having had a direct conversation regarding the information he is now been put in the position where he cannot act on it until after it has been made public.
The tipper, in this case Reno, has a fiduciary duty to keep non-public information private and is liable under section 10b-5, Insider Trading.
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