What is the definition of insider trading?

Insider trading is defined as the practice of trading based on confidential, non-public information. This occurs when an individual has access to material information about a company that is not yet available to the public and uses that information to make investment decisions. Such actions are illegal because they create an unfair advantage in the stock market and violate the principle of transparency.

Trading based on non-public information undermines investor confidence in the integrity of the financial markets and can lead to significant legal consequences for individuals and firms involved. This definition captures the essence of insider trading, highlighting the ethical and legal implications tied to the misuse of confidential information for personal gain.