Tipping

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DEFINITION

The act of providing material non-public information about a publicly-traded company to a person who is not authorized to have the information. This is an illegal act. Information is considered non-public until it has been publicly released and the financial markets have had sufficient time to digest the impact the information may have had on prices.

INVESTOPEDIA EXPLAINS

Investment bankers are often in possession of material non-public information that can be used for tipping, although occurrences of tipping are very rare. In the event that a person unknowingly passes on a tip, he or she may still have performed a criminal act by being careless with the information.

Tips can be used to make insider trades before the information becomes available to the public. The law prohibits tippees, or those who receive material non-public information, from making financial transactions based on the information they have received.


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