Why is insider trading illegal?

Author: IFLR Correspondent | Published: 10 Mar 2020

It has been clear, at least since a Securities and Exchange Commission (SEC) administrative decision in 1960, that as a general matter it is unlawful in the US for a person to purchase or sell securities of a corporation when in possession of material nonpublic information about the corporation. Trading by an insider, or by a tippee, can violate Section 10(b) of the Securities Exchange Act of 1934, and in particular the anti-fraud provisions of SEC Rule 10b-5. A number of former corporate insiders are in jail for ignoring the insider trading prohibition....