What is Insider Training and what are the Consequences?

Insider trading involves buying or selling a public company’s stock by someone who is what can be best described as an outsider that has non-public, important (material) information such as a merger, the hiring of a C-level executive, or financial results about that stock for any reason.

Insider trading can be either illegal or legal depending on when the insider makes the trade. It is illegal when the material information is not non-public knowledge, and this sort of insider trading comes with harsh consequences.

KEY POINTS

• Insider trading is the buying or selling of a publicly-traded company’s stock by someone who is privy to non-public, material information about that stock
• Material nonpublic information is any information that could substantially impact an investor’s decision to buy or sell the stock that has not been made available to the public.
• This form of insider trading is illegal and comes with harsh penalties including both potential fines and jail time.
• Insider trading can be legal as long as it conforms to the rules set forth by the SEC.