Insider Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Insider, written in plain English, along with examples of how it is used.

What is Insider?

It refers to the person who have the access to the private and confidential information about the company progress which the common public so not have an access to, in regards to future prospects, orders, managemets etc which may affect the value of the stocks of that company.Such person holding such position in the company or stock brokerage is considerd a breach of federal law as the information is supposed to be private and confidential.

History and Meaning of Insider

An insider is a person who has access to confidential or non-public information about a company or business entity, and who may have the ability to use this information to gain an advantage when trading or investing. This can include company employees, officers, directors, or shareholders who hold more than 10% of the company's stock. Insider information can pertain to financial results, business strategies, upcoming mergers or acquisitions, and other information that could affect the value of a company's securities.

The use of insider information for trading or investment purposes is illegal under securities laws, as it gives an unfair advantage to the person with access to the information. The Securities and Exchange Commission (SEC) and other regulatory bodies enforce strict rules around insider trading to protect the integrity of the financial markets.

Examples of Insider

  1. A company executive purchases stock in their own company based on private information about an upcoming merger that has not yet been made public.

  2. A company director shares non-public information about the company's financial results with a friend or family member who then uses that information to make investment decisions.

  3. A company employee shares confidential information about a new product launch with a relative who then purchases stock in the company prior to the official announcement.

Legal Terms Similar to Insider

  1. Insider trading: The illegal use of inside information to make investment decisions.

  2. Tipper/tippee: A tipper is a person who shares non-public information with a tippee, who then trades on that information. Both the tipper and tippee can be liable for insider trading.

  3. Securities fraud: The use of false or misleading information to induce someone to buy or sell securities. Insider trading can be a form of securities fraud.