Insider Trading

AAA

DEFINITION of 'Insider Trading'

The buying or selling of a security by someone who has access to material, nonpublic information about the security.

INVESTOPEDIA EXPLAINS 'Insider Trading'

Insider trading can be illegal or legal depending on when the insider makes the trade: it is illegal when the material information is still nonpublic--trading while having special knowledge is unfair to other investors who don't have access to such knowledge. Illegal insider trading therefore includes tipping others when you have any sort of nonpublic information. Directors are not the only ones who have the potential to be convicted of insider trading. People such as brokers and even family members can be guilty.

Insider trading is legal once the material information has been made public, at which time the insider has no direct advantage over other investors. The SEC, however, still requires all insiders to report all their transactions. So, as insiders have an insight into the workings of their company, it may be wise for an investor to look at these reports to see how insiders are legally trading their stock.

RELATED TERMS
  1. Stop Trading On Congressional Knowledge ...

    A bipartisan bill signed into law Apr. 4, 2012 by President Barack ...
  2. SEC Form 10-K405

    A form used by the Securities and Exchange Commission (SEC) prior ...
  3. Insider Information

    A non-public fact regarding the plans or condition of a publicly ...
  4. Open-Market Transaction

    An order placed by an insider, after all appropriate documentation ...
  5. Poop

    A slang term often used to describe inside information or people ...
  6. Material Insider Information

    Material information, about certain aspects of a company, that ...
Related Articles
  1. What Investors Can Learn From Insider ...
    Markets

    What Investors Can Learn From Insider ...

  2. Tales From Wall Street's Crypt
    Bonds & Fixed Income

    Tales From Wall Street's Crypt

  3. Top 4 Most Scandalous Insider Trading ...
    Investing Basics

    Top 4 Most Scandalous Insider Trading ...

  4. Female CEOs Who Climbed The Corporate ...
    Entrepreneurship

    Female CEOs Who Climbed The Corporate ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center