Insider Trading

Insider trading refers to the buying or selling of a company's stock based on non-public, material information about that company. This practice is illegal because it creates an unfair advantage for those with inside knowledge over regular investors. Securities laws prohibit insiders, such as executives or employees, from trading based on this information to maintain a level playing field in the stock market. Violators can face severe penalties, including fines and imprisonment, as it undermines trust in the financial markets.