Insider trading involves trading a company’s stock or other securities by individuals who have access to non-public, material information about the company. This material information could significantly influence an investor’s decision on whether to buy or sell the stock. Examples include undisclosed financial performance details, mergers, acquisitions, or any major executive changes within the company.
You can be charged with insider trading if you buy or sell stocks based on this privileged information before it becomes public. Charges can also arise if you pass this information to others who then engage in trading (often termed as ‘tipping’). Regulatory bodies like the Securities and Exchange Commission (SEC) oversee the enforcement of insider trading laws. Violations can lead to severe penalties, including fines and imprisonment, depending on the severity and circumstances of the breach.