Guide Note

Insider trading is the purchase or sale of publicly traded securities based on information not accessible to the public. Now considered illegal in many countries, insider trading allows practitioners to use their fiduciary relationship with an organization or individual in order to gain an advantage over public traders.

Fast Facts

1. Regulated by the Securities Exchange Commission (SEC)
2. Two SEC rules apply:
   1. 10b5-1
   2. 10b5-2
3. Martha Stewart accused of insider trading in 2002
4. Major component of the Enron scandal
5. Legal when insiders conduct intra-company trades

1. Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments¹
2. Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information¹
3. Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded¹
4. Government employees who learned of such information because of their employment by the government¹
5. Other persons who misappropriated, and took advantage of, confidential information from their employers¹