Inside Information Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Inside Information, written in plain English, along with examples of how it is used.
What is Inside Information?
Information related to finance which is not available to the general public and can only be discovered from someone within a corporation.
History and Meaning of Inside Information
Inside information refers to information that could significantly affect the value of a publicly traded company's securities, but which is not available to the general public. This category of information is not only limited to the business world but can occur in any field where confidential information is discussed. The act of disclosing or using insider information for personal benefit is illegal and considered as a type of securities fraud.
In the past, insider trading was not considered illegal in the United States. It wasn't until the Securities and Exchange Act of 1934 and the Insider Trading and Securities Fraud Enforcement Act of 1988 were passed that insider trading was made illegal. The prohibition on insider trading acknowledges the reality that some parties with access to confidential, nonpublic information may use that information to gain an unfair advantage in the securities markets.
Examples of Inside Information
A trader who purchases a large number of shares in a company just before the company announces an increase in dividends would be considered to have inside information.
A board member of a corporation who discloses information regarding an upcoming merger to someone outside the company would be considered guilty of insider trading.
A government employee who leaks information to someone outside the government, allowing the individual to trade on that information, is considered to have engaged in insider trading.
Legal Terms Similar to Inside Information
Secured information - Information that is classified and legally protected from unauthorized disclosure or distribution.
Privileged information - Information that is confidential and cannot be disclosed without legal protection, like attorney-client privilege.
Confidential information - Information that must be kept private and confidential to protect someone's privacy, trade secrets, or governmental interests.