What is Stock Market Insider Trading?
Stock market insider trading is the buying and selling of stocks and other securities by individuals with access to non-public information about the company. Insider trading includes trading by corporate officers, directors, and employees, as well as large shareholders. It is illegal to use material, non-public information to trade stocks and other securities.
Insider trading is a form of securities fraud that involves the buying and selling of stocks and other securities by corporate officers, directors, and employees with access to material, non-public information about the company. The term "insider" refers to someone with access to confidential information about a company. This could be an executive, director, or large shareholder of the company.
Insider trading is illegal because it gives the insider an unfair advantage over other investors. When someone trades on material, non-public information, they are able to make more informed decisions than other investors and can, therefore, make larger profits.
Insider trading also has the potential to manipulate stock prices. If an insider trades on material, non-public information, they can create an artificial demand for a stock and cause the price to rise. This can be done by buying and selling the stock or by spreading rumors about the company.
The Securities and Exchange Commission (SEC) has strict regulations in place to prevent insider trading. The SEC requires corporate officers, directors, and large shareholders to report any trades they make in their company's stock. The SEC also requires companies to disclose any material, non-public information that may affect the stock price.
The penalties for insider trading can be severe. The SEC can fine individuals and companies for insider trading and can even bring criminal charges against those found guilty. In addition, the SEC can suspend trading in a company's stock if it finds evidence of insider trading.
Insider trading is a serious violation of securities laws and can have serious consequences for those found guilty. It is important for investors to be aware of the risks associated with insider trading and to be cautious when investing in stocks. By understanding the risks and following the rules, investors can protect themselves from being a victim of insider trading.