Insider Trading Rules

• Insider trading is defined as trading based on potentially price-moving information that has not yet been disclosed to the public. Insider trading laws require material, or potentially price-moving information, be made public before insiders can trade on it. It is illegal to buy or sell based on this information if it has not yet been made public.
  
  

Insiders

• An insider is a person who is in a position to have access to material company information. This can include company executives, accountants or anyone else who may gain access to material information. Likewise, if you have a friend or relative who is an insider who tips you, you too become an insider and will be held responsible for insider trading if you trade on that information before the public has access to it.
  
  

Combatting Insider Trading

• Insider trading is regulated by the Securities and Exchange Commission. However, insider activity is enforced by other agencies, companies and local governments. For example, corporations may monitor their key employees by requiring them to disclose any company stock trades they make before they make them. If someone is suspected of insider information, the SEC or local authorities oftentimes investigate whether family, friends and neighbors of an insider have also traded large quantities of company stock related to that information.
  
  

Why Unfair Trading is Harmful

• In order for the stock market to maintain stability, authorities must enforce fairness and transparency. If some people are given an edge over everyone else, the market becomes unfair for those who don't have access to material information. If investors stop trusting the markets they will stop investing and everyone will lose.