Insider Trading: Who Are The Insiders?

Insider Trading:  Who Are The Insiders?

When it comes to Insider Trading, which is an act of trading of a public company’s stock or other securities by individuals with access to non-public information about the company.  

Some kinds of trading based on insider information are considered to be illegal. But don’t think that those who place the trades are the only guilty ones. A common misconception is that only directors and upper management can be convicted of insider trading.  

Even though company insiders or executives, their position tends to place them at more risk than ordinary employees. The laws of insider trading and tipping apply to everybody. Anybody who has material and non-public information can commit such an act. A person who becomes aware of non-public information and trades on that basis may be guilty of a crime. 

This means that nearly anybody including brokers, family, friends and employees can be considered an insider. To someone caught “tipping”, this is an outsider with non-public information, that tipster can also be found liable.  

As a person is defined as an “insider” if they’ve a relationship with a business that makes them privy to information that has yet to be released to the public. Insiders are expected to maintain a fiduciary relationship with their companies and shareholders. And trying to profit from insider information puts the insider’s interests above those of the entities to whom they owe this duty.  

Here are examples of cases that have included and convey and relate to who the insiders are: 
  • Corporate officers, directors, and employees who traded the corporation’s securities after learning of significant, confidential corporate developments.
  • Friends, business associates, family members, and other “tippees” of such officers, directors, and employees, who traded the securities after receiving such information.
  • Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded.
  • Government employees who learned of such information because of their employment by the government.
  • Other persons who misappropriated, and took advantage of, confidential information from their employers.
Categories: Trading