insider trading


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Insider trading

Trading by officers, directors, major stockholders, or others who hold private inside information allowing them to benefit from buying or selling stock.

Insider Trading

A trade one makes because one has relevant information on a company that has not been released to the public. For example, a person may have access to a company's financial state prior to its official announcement, and then buy or sell that company's stock accordingly. Generally speaking, those who engage in insider trading are a company's board of directors, executives, major shareholders, and other investors who have access to non-public information. Insider trading is a serious crime when it is done without proper authorization.

insider trading

The illegal buying or selling of securities on the basis of information that is generally unavailable to the public. An example is the purchase by a director of shares of his or her firm's stock just before the release of surprisingly good earnings information.
Case Study In November 2001 the Securities and Exchange Commission charged 15 individuals with insider trading in the shares of Nvidia Corporation, a California maker of graphics chips. According to the SEC, in March 2000 Nvidia's president used e-mail to inform employees the firm had won a major contract to supply chips for Microsoft Corporation's new Xbox video game system. News of the contract was not announced to the public until five days following the employee e-mail. The time lag allowed the 15 individuals—11 employees plus 4 people tipped by the employees—to profit by purchasing Nvidia shares prior to the public announcement of the contract. The case was relatively unusual in that the individuals charged with insider trading were low-level employees rather than high-level executives.

Insider trading.

If managers of a publicly held company, members of its board of directors, or anyone who holds more than 10% of the company trades its shares, it's considered insider trading.

This type of trading is perfectly legal, provided it's based on information available to the public.

It's only illegal if the decision is based on knowledge of corporate developments, such as executive changes, earnings reports, or acquisitions or takeovers that haven't yet been made public.

It is also illegal for people who are not part of the company, but who gain access to private corporate information, to trade the company's stock based on this inside information. The list includes lawyers, investment bankers, journalists, or relatives of company officials.

insider dealing

or

insider trading

transactions in FINANCIAL SECURITIES by persons having access to privileged (secret and confidential) information not yet available to the general investing public, and who in consequence stand to profit from exploiting this knowledge. For example, an employee of a merchant bank engaged in working out the financial details of a prospective TAKEOVER BID by a client firm for another company, might himself or through intermediaries buy shares in the target company prior to the public announcement of the bid.

In the UK, the provisions relating to the criminal offence of insider dealing are now contained in Part V of the Criminal Justice Act 1993 which replaced the Company Securities (Insider Dealings) Act 1985. In addition, the directors and the company will be bound by the Stock Exchange Model Code. See STOCK MARKET.

insider trading

any transactions in securities such as STOCKS and SHARES by persons having access to privileged (confidential) information not as yet available to the general investing public, and who in consequence stand to gain financially from this knowledge. For example, a person who is employed by a merchant bank and is involved in working out details of a prospective TAKEOVER by a client firm of another firm may himself or through other people arrange to purchase shares in the target firm prior to the public announcement of the takeover. See CITY CODE.
References in periodicals archive ?
Capital, a SAC Capital affiliate, was found guilty of insider trading on
trading on market prices have found that insider trading generates
The commission also ordered him to pay a fine of P174 million, or P1 million each for 174 counts of insider trading.
The offense of insider trading is based nominally on the prohibition against fraud found in Rule 10b-5 of the Securities Exchange Act, (3) but neither Rule 10b-5 nor its authorizing statute, section 10(b) of the Exchange Act, say anything about insider trading.
Recently National Assembly Standing Committee on Finance had also expressed its displeasure on the performance of the SECP regarding the measures taken by it to prevent insider trading. The committee directed the SECP to provide comparative practices in the world to stop insider trading and submit a report to the secretariat.
The Article concludes by cautioning against relying upon such an unproven or unfalsifiable claim as a justification for existing or expanded civil and criminal insider trading enforcement powers.
Newman went up to the Second Circuit on appeal because the defendants argued that "the district court erred in failing to instruct the jury that it must find that a tippee knew that the insider disclosed confidential information in exchange for a personal benefit." (61) The Government insisted that "Newman and Chiasson were criminally liable for insider trading because, as sophisticated traders, they must have known that information was disclosed by insiders in breach of a fiduciary duty, and not for any legitimate corporate purpose." (62) But the Second Circuit did not agree; instead, it overturned the convictions on the grounds "that the district court's instruction failed to accurately advise the jury of the law." (63)
"Insider trading undermines investor confidence in the integrity of the markets and those who engage in it must be held accountable."
The SEC lawsuit also says "Levoff also had a previous history of insider trading, having traded on Apple's material nonpublic information at least three additional times in 2011 and 2012.
"I can definitely say the SEC is aggressively pursuing a number of insider trading investigations at the moment," SEC commissioner Ephyro LuisAmatongsaid.
A code of conduct for prevention of insider trading, similar to the one applicable to listed companies, should be applied to market infrastructure institutions such as stock exchanges and depositories too as they also handle unpublished price-sensitive information.
This month, the Supreme Court confirmed a more expansive application of criminal insider trading violations when it unanimously affirmed the Ninth Circuit Court of Appeals decision in Salman v.