What Is Insider Trading and Is It Illegal?

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An insider is a person who possesses either access to valuable non-public information about a corporation or ownership of stock equaling more than 10% of a firm’s equity. This makes a company’s directors and high-level executive insiders.

To be accused of insider trading, you must usually be someone who has a fiduciary duty to another person, institution, corporation, partnership, firm, or entity. You can get in trouble if you make an investment decision based upon information related to that fiduciary duty that is not available to everyone else. This insider information allows a person to profit in some cases, and avoid loss in others.

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