13.1.1. Insider Trading
Insider trading involves the trading of securities based on material, nonpublic information. It is unlawful for anyone who gains insider information and knows it to be confidential to trade on such information. It is also unlawful for anyone to pass on inside information that is then traded on. Both the actions of the person trading on the information and the person who revealed the information are considered to be illegal insider trading.
Example: Suppose an employee at a brokerage hears material, nonpublic information about a company in a casual conversation at the water cooler, and the employee goes home and tells a neighbor, who promptly bu