Insider Trading

Filed Under » , ,
Dictionary Says

Definition of 'Insider Trading'

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

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 Definitions

  •

    Insider

    A director or senior officer of a company, as well as any person or entity that beneficially owns more than 10% of a company's voting shares. For purposes of insider trading, the ...
    Read More »

  • Inside Director

    Any member of a company's board of directors who is either an employee or stakeholder in the company.
    Read More »

  • Insider Information

    A nonpublic 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 ...
    Read More »

    • Open-Market Transaction

      An order placed by an insider, after all appropriate documentation has been filed, to buy or sell restricted securities openly on an exchange.
      Read More »

    • Poop

      A slang term often used to describe inside information or people with insider information. A poop has access to nonpublic information, which can be used to their advantage. Investors are ...
      Read More »

    • Securities And Exchange Commission - SEC

      A government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers ...
      Read More »

    • Material Insider Information

      Material information, about certain aspects of a company, that has not yet been made public but that will have at least a small impact on the company's share price once released. It is ...
      Read More »

    • Bullet Dodging

      A form of option granting in which the award of options is delayed until a piece of bad news becomes known to the public and the stock's price falls. Because an option's strike price is ...
      Read More »

    • Misappropriation Theory

      A perspective that defines the act of stealing confidential information from an employer and then trading securities based on the misappropriated insider knowledge. In the United States, ...
      Read More »

    • SEC Form 10-K405

      A form used by the Securities and Exchange Commission (SEC) prior to 2003. SEC Form 10-K405 was used to indicate that an officer or director of a company failed to file a Form 4 (or ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions