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Illegal insider trading is when non public corporate information has influenced a trade when someone buys or sells. When someone uses this information it allows them to gain an unfair advantage over other investors causing the market to gain or lose money. If insider trading were allowed then people that invested would no longer feel confident to invest. The legal way to gain an advantage over other investors would be for them to obtain skills in analyzing and understanding accessible information. According to the Securities and Exchange Commission, “Under Rule 10b5-1, the SEC defines insider trading as any securities transaction made when the person behind the trade is aware of nonpublic material information, and is hence violating his or her duty to maintain confidentiality of such knowledge”(Reem Heakal).
An insider consists of someone who is accessible to information that has not yet been released to the public. These include CEO’s, executives, and directors that are exposed to the information. Insiders that also may have to keep quit consist of Accountants and Investment Bankers. According to the article by Reem Heakal, “In the second part of Rule 10b5-2, the SEC has outlined three nonexclusive instances that call for a duty of trust or confidentiality: (1) when a person expresses his or her agreement to maintain confidentiality, (2) when history, pattern and/or practice show that a relationship has mutual confidentiality and (3) when a person hears information from a spouse, parent, child or sibling (unless it can be proven that such a relationship has not and does not give rise to confidentiality)”(Reem Heakal).
It all began about a year after Mart ...