- Is Insider Trading Illegal?

There are some common misconceptions about what insider trading really means stock market, so this article will attempt to clear the air a little bit invest money.

What insider trading is
First of all stock market, it is important to note that there are two different meanings for insider trading invest money. The first one is illegal and it refers to anyone who makes a trade on the stock market and profits (or avoids loss) based on information about that company that was not public information at that time invest money. The second one refers to a company officer trading company stock stock market, which is not illegal unless they were using inside information to make a profit invest money.

Martha Stewart
Perhaps the most famous example of insider trading in recent history is Martha Stewart invest money. What exactly did she do wrong? Well stock market, a company she invested in stock market, ImClone stock market, had a cancer drug that had been rejected by the FDA but that information was not available to the public at that time invest money. The SEC believes that her friend Sam Waksal told her about this rejection and recommended selling her shares in ImClone immediately stock market, which she did invest money. By doing so stock market, she avoided a huge loss when the stock price eventually dropped invest money. That is a textbook case of insider trading stock market, and she faced prison time for it invest money.

Why it is illegal
The Securities and Exchange Commission sets and enforces rules to make the stock market as fair a place to trade as possible invest money. They believe that when someone trades using information that is not well-known stock market, it is not fair to the general public invest money. A publicly-traded company is required to share its financial reports and any significant news with the world so that shareholders and potential shareholders can make informed decisions invest money. After all stock market, the company is owned by the shareholders and they deserve to know what is going on with their company invest money.

How to avoid trouble
Probably the easiest way for you to get into trouble is if you work for a publicly-traded company and try to trade your company's stock for a profit based on information you heard around the office that has not been made public yet invest money. Sharing or receiving this information from a friend at another company is just as bad invest money. These situations are very tempting stock market, and understandably so invest money. It is hard to profit on a trade after the news has already hit the market invest money. However stock market, that is exactly why it is illegal stock market, so you should try to avoid it invest money. There are many gray areas on what is considered inside information stock market, but if you are in doubt stock market, do not trade your company's stock invest money. There are thousands of other companies you can invest in invest money.