Insider Trading
Insider Trading
An “insider,” according to the United States Securities and Exchange Commission (SEC), is any director or senior officer of a company or a subsidiary, as well as those people who can be presumed to have access to inside information. Anyone owning more than 10 per cent of voting shares in a company is also considered an insider by the SEC. Contrary to public perception; most insider trading is perfectly legal. 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. 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.
In the United States, insider trading has been illegal since 1934. The Securities and Exchange Commission (SEC), the United States government agency created by the Securities Exchange Act (1934), protects this practice. It requires companies ?to submit full public-disclosure statements before issuing securities on the open market?(Cross & Miller 155). The SEC regards the practice of insider trading as unfair to investors.
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