Information gained by someone inside, or close to, a listed company which could confer a financial advantage if used to buy or sell shares. It is illegal for a person who is in possession of inside information to buy or sell shares on the basis of that information.
Insider trading is the trading of a public company’s stock or other securities by individuals with access to nonpublic information about the company. In a number of countries, trading based on insider information is illegal.
Insider information is any kind of data pertinent to the inner workings of the corporation that has not yet been revealed to the public. Corporate information that has been relayed via financial statements, press releases, or any generally accessible media would not be considered insider information. Insider information may become available to virtually anyone, including corporate executives, stockbrokers, other company employees, and even family members. Individuals who are purview to inside information are known as insiders. Use of insider information has a vast potential for having a serious and detrimental effect on the securities and derivatives of a given corporation. Thus, exploiting insider information for material gain may be deemed unlawful. One example of insider information abuse is insider trading.
Insider information, also known as material non-public information, refers to confidential or proprietary information about a publicly traded company that has not been disclosed to the general public and could potentially impact the company’s stock price if made public.
Insider trading occurs when individuals buy or sell securities based on material non-public information in violation of securities laws, including trading by company insiders (such as executives or employees) or outsiders who illegally obtain insider information.
Insiders typically include company executives, directors, employees, and other individuals with access to confidential information about the company’s financial performance, business strategies, or significant events that could affect its stock price.
No, trading on insider information is illegal and constitutes insider trading, which is prohibited by securities laws in most jurisdictions, including the United States under the Securities Exchange Act of 1934.
Consequences of insider trading may include civil penalties, such as fines or disgorgement of profits, criminal prosecution leading to imprisonment, reputational damage, civil lawsuits by affected parties, and potential sanctions from regulatory authorities or stock exchanges.
Insider information is confidential or non-public information not yet disclosed to the general public, while public information is information that has been disseminated to the public through official channels, such as press releases, financial reports, or regulatory filings.
Insiders have a duty to safeguard confidential information and refrain from trading securities based on material non-public information, as well as to comply with insider trading laws and company policies regarding the disclosure and use of confidential information.
Yes, inadvertent disclosures of insider information may still constitute insider trading if the individual trades securities based on the material non-public information before it becomes public knowledge, knowingly or recklessly.
Regulatory authorities detect and prosecute insider trading through various means, including market surveillance, analysis of trading patterns, tips from whistle-blowers, cooperation with law enforcement agencies, and investigations into suspicious trading activity.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 29th March, 2024.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
- Page URL:https://dlssolicitors.com/define/insider-information/
- Modern Language Association (MLA):Insider Information. dlssolicitors.com. DLS Solicitors. April 27, 2024 https://dlssolicitors.com/define/insider-information/.
- Chicago Manual of Style (CMS):Insider Information. dlssolicitors.com. DLS Solicitors. https://dlssolicitors.com/define/insider-information/ (accessed: April 27, 2024).
- American Psychological Association (APA):Insider Information. dlssolicitors.com. Retrieved April 27, 2024, from dlssolicitors.com website: https://dlssolicitors.com/define/insider-information/