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Is insider trading legal?

Insider trading is considered a white collar crime because it is usually committed by people who have access to sensitive information. Therefore they are likely to already be employed by a corporate firm when they commit the crime.

It is an act of trading based on information that has not yet been made available to the public. If the information has already become public, then it is likely that the act itself is not illegal.

What kind of activities fall within the crime?

Crimes relating to insider trading are not just limited to trading on your own behalf. It also includes misusing any sensitive and private information that relates to the company in question. This means that it is also illegal to tell others about sensitive non-public information that you have in order for them to trade themselves and benefit from a personal gain.

A famous case of insider trading is the 2003 case of Martha Stewart, who engaged in insider trading by selling almost 4000 shares once she received a tip about the company she owned shares of. Shortly after she acted upon her insider information, the shares in the company dropped by 16 percent.

When is insider trading legal?

Legal insider trading is very common, but it must follow a certain procedure. All trading activities must be submitted electronically, declaring all transactions and deferred transactions.

Defining illegal insider trading can be difficult, and proving that someone is guilty of illegal insider trading can be hard to achieve. However, illegal insider trading is a serious crime, and if you have been accused, you should take action immediately.

Source: Investopedia, "Insider Trading," accessed Feb. 02, 2018

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