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insider trading

Contributor(s): Ivy Wigmore

Insider trading is the buying and selling of securities based on information that has not been made available to the general public. 

Because insider information gives an investor an advantage over others, it is illegal and punishable by law. In the United States, the Securities and Exchange Commission (SEC) oversees securities transactions, activities of financial professionals and mutual fund trading to prevent fraud and intentional deception.

Mechanisms in place to prevent insider trading include quiet periods, during which corporate insiders are prohibited from selectively divulging information to some investors before it is made public, and blackout periods, which prohibit trading by insiders at similar times and for similar reasons. 

This was last updated in November 2013

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"Information available to the public" is very broad. One guy did some trades on Gulf before it was bought by Chevron and it was suspected that he had insider information. When questioned, he mentioned he saw Gulf's private jet at the airport near Chevron. Since this was visible to anyone, it was not "insider" information.
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