What is leakage?

By Justin Bynum AAA
A:

Leakage describes a situation where information is released to the public when it should have remained private. This is often referred to as "leaking information".

Most commonly, leakage takes the form of corporate insiders disseminating confidential information about publicly traded companies to outside investors. The investors then use the information to profit illegally from the non-public intelligence by buying, selling, or shorting the company's corresponding securities. Additionally, leakage may take the form of former employees using private information to maliciously punish their former employers or the form of company executives leaking confidential information to securities firms and/or the press as a way to manage expectations.

While leakage traditionally has been intentional, in the information age, it has taken on a less insidious, although equally harmful, form. The accidental dissemination of confidential data by careless employees, faulty technology, poor infrastructure and lax business practices all constitute leakage. Whatever the cause, leakage is unseemly, at best, and criminal, at worst.

To read more about insider knowledge, check out Uncovering Insider Trading and Defining Illegal Insider Trading.

This question was answered by Justin Bynum.

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