Insider Information

What is 'Insider Information'

Insider information is a non-public fact regarding the plans or condition of a publicly traded company that could provide a financial advantage when used to buy or sell shares of the company's stock. Insider information is typically gained by someone who is working within or close to a listed company. If a person uses insider information to place trades, he or she can be found guilty of insider trading. Insider trading is illegal when the material information has not been made public and has been traded on. This is because the information gives those having this knowledge an unfair advantage.

BREAKING DOWN 'Insider Information'

Insider information is knowledge about a publicly traded company that could be used to an investor's advantage. Knowing about a company's significant, confidential corporate developments, such as the release of a new product, could provide an unfair advantage if the information is not public, that is, if only a few people know about the developments.


In the United States, the Securities and Exchange Commission (SEC) regulated legal insider trades - where corporate insiders, including officers, directors and employees, buy and sell stock in their own companies. In addition, the SEC investigates instances of illegal insider trading. Those found guilty of insider trading can serve jail time and be fined.

RELATED TERMS
  1. Disclosure

    The act of releasing all relevant information pertaining to a ...
  2. Whisper Number

    1. Traditionally, the unofficial and unpublished earnings per ...
  3. Insider Trading

    The buying or selling of a security by someone who has access ...
  4. Debt Signaling

    A theory that states that an announcement regarding a firm's ...
  5. Insider

    A director or senior officer of a company, as well as any person ...
  6. Whistleblower

    Anyone who has and reports insider knowledge of illegal activities ...
Related Articles
  1. Markets

    What Investors Can Learn From Insider Trading

    Some insider trading is actually legal - and can be extremely telling for investors.
  2. Options & Futures

    When Insiders Buy, Should Investors Join Them?

    Insider tracking can inform your investment strategy, but it requires research and a level head. Find out what to look for.
  3. Options & Futures

    Can Insiders Help You Make Better Trades?

    Find out why the trading activity of owners and executives can be a valuable trade-confirmation tool.
  4. Your Practice

    RIAs: Here's What to Know About the Fiduciary Rule

    The real impact of the new Department of Labor bill has yet to be felt in the retirement industry, but changes are coming. Here's what to know.
  5. Budgeting

    Low-Income Households to Get Broadband Subsidy

    The FCC's recently approved broadband subsidy for low-income households should help many people get online. Not that everyone's in favor of it.
  6. Retirement

    Laws That Help Low Income Retirement

    If you're retired – or about to be – and money is tight, look to these programs and other benefits for help should you need it.
  7. Products and Investments

    SEC Derivatives Rule May Limit Diversification

    The SEC has proposed rules that will limit the use of derivatives by fund managers. Critics believe the rules will impede funds' ability to diversify.
  8. Savings

    Check for Lost Property Now – Before a State Grabs It

    You may be richer than you think. There are billions in unclaimed funds in the U.S. Here's how to determine whether some of that money is yours.
  9. Taxes

    Owe Taxes? You Could Lose Your Passport

    A rule slipped into a transportation bill allows the U.S. government to revoke your passport if your tax debt exceeds $50k. Here’s what it all means.
  10. Your Practice

    Potential Impact of New Fiduciary Rules on RIAs

    A look at how RIAs and fee-only advisors will be impacted by the DOL's new fiduciary rule.
RELATED FAQS
  1. What's the difference between insider trading and insider information?

    Learn about insider information and insider trading and the differences between the two; both involve nonpublic information ... Read Answer >>
  2. Has the Efficient Market Hypothesis been proven correct or incorrect?

    Explore the efficient market hypothesis and understand the extent to which this theory and its conclusions are correct or ... Read Answer >>
  3. What exactly is insider trading?

    An "insider" is any person who possesses at least one of the following: 1) access to valuable non-public information about ... Read Answer >>
  4. What is the Writ of Mandamus?

    Learn how the powerful, but rarely used, court-ordered writs of mandamus can end an injustice and force someone, or a public ... Read Answer >>
  5. Are UTMA accounts escheatable?

    Find out whether your UTMA account can be escheated, the basics of escheatment and who is responsible for maintaining account ... Read Answer >>
  6. What is the SEC's escheatment process?

    Learn about how states can take ownership of abandoned property through the process of escheatment. Understand how an owner ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center