Insider Trading

Trading a company's securities using important information the public doesn't have.

Insider trading is buying or selling a stock based on material, non-public information — an unannounced merger, a bad earnings report, a failed drug trial. Corporate insiders may legally trade their own company's stock through disclosed, pre-scheduled plans; the crime is trading on secrets, or tipping others who do. Enforcement is aggressive because the offense corrodes the market's basic bargain: that no one is playing with a marked deck. Penalties include disgorgement, fines, and prison.

Prosecutors charged the consultant with insider trading for buying call options days before the acquisition was announced.