What is insider trading?

Insider trading refers to the illegal practice of purchasing or selling stocks based on material, non-public information about a company. This practice undermines the integrity of the securities markets by creating an uneven playing field, where individuals with access to confidential information can take advantage of their knowledge before it becomes available to the general public. This is deemed unfair to regular investors who do not have access to such information and can lead to significant penalties and legal repercussions for those involved.

The concept of material information is crucial, as it refers to any information that could influence an investor's decision to buy or sell a stock. Non-public information is any relevant information that has not yet been disclosed to the public, which might include earnings reports, mergers and acquisitions, or other significant corporate events. Engaging in insider trading violates securities laws and regulations, which are designed to protect market integrity and promote fair trading practices.

The other definitions, although they touch on aspects of trading and regulations, do not accurately capture the essence of insider trading. For instance, trading based on public information is legal and aligns with fair market practices. The idea that corporate executives profit from announcements doesn’t emphasize the illegality of exploiting non-public information. Lastly, while reporting trades is an important regulatory requirement, it is