Insider Trading

Insider trading is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders, such as officers, directors, and employees, buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC.


Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Examples of insider trading cases that have been brought by the SEC are cases against:

1) Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

2) Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

3) Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

4) Government employees who learned of such information because of their employment by the government; and

5) Other persons who misappropriated, and took advantage of, confidential information from their employers.

Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.

You can view insider form 4 and insider summary data from Nasdaq.com. Enter the site's home page, key in a stock symbol, from your new page use the pull down menu to select "holdings/insider summary" or "insider form 4."