INSIDER TRADING - Is Insider Trading Illegal?. First, it is important to note that there are two different meanings of insider trading.
The first is illegal and means any person who performs an operation on the stock market and gains (or avoids the loss) based on information about the company were not available public information at that time. The second refers to an official action of the trading company, which is not illegal unless it is used inside information to make a profit.
Martha Stewart
Perhaps the most famous example of insider trading in recent history is Martha Stewart. What exactly did they do wrong? Well, a company that invests, ImClone, had a cancer drug had been rejected by the FDA, but that information was not available to the public at that time. The SEC believes that her friend Sam Waksal told of this rejection and recommended the sale of its ImClone shares immediately, which he did. This way, you avoid a big loss when the stock price eventually dropped. What is a typical case of insider trading, and faced jail for it.
Why is it illegal
The Securities and Exchange Commission establishes and enforces rules for the stock market as just a place to trade as possible. They believe that when someone operations using information that is not well known, it is not fair to the general public. A publicly traded company is required to share their financial reports and any other important news to the world for shareholders and potential shareholders can make informed decisions. After all, the company is owned by shareholders who are entitled to know what's going on with your business.
How to avoid problems
Probably the easiest way for you to get into trouble is if you work for a publicly traded company and try to transactions in the share of your company for a profit based on information overheard in the office has not been made public yet. Share and receive information from a friend at another company so bad. These situations are very tempting, and understandably so. It is hard to capitalize on a trade after the news has already reached the market. Yet that is exactly why it is illegal, so you should try to avoid it. There are many gray areas in what is considered privileged information, but if you are in doubt, do not trade in securities of your company. There are thousands of other companies can invest in.
INSIDER TRADING - Is Insider Trading Illegal?
Insider trading is considered as illegal because it this the buying ans selling by the traders is done on the basis of such information that is unopened to the public. It is like taking advantage of greater position in the market.
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