Insider Trading

Insider trading undermines market fairness and investor confidence. Enforcement has intensified globally — the SEC, FCA, and European regulators use sophisticated surveillance tools, phone records, and data analytics to detect suspicious trading patterns. You don't have to be an executive to be prosecuted — tippers, tippees, friends, family, and even casual acquaintances have been convicted.

Information is material if a reasonable investor would consider it important in making an investment decision. It is non-public if it hasn't been disseminated to the general public through official channels.

Examples of MNPI:

• Upcoming earnings results (better or worse than expected)
• Pending mergers, acquisitions, or divestitures
• Major contract wins or losses
• Regulatory approvals or rejections
• Changes in executive leadership
• Product launches or recalls
• Cybersecurity breaches or major lawsuits

• Corporate insiders — officers, directors, employees with access to MNPI
• Tippers — insiders who share MNPI with others (even without trading themselves)
• Tippees — anyone who trades on MNPI received from an insider
• Misappropriators — anyone who steals MNPI (hackers, consultants, lawyers, accountants)
• Front-runners — brokers who trade ahead of large client orders

United States (SEC/DOJ)

• Criminal: up to 20 years imprisonment, fines up to $5 million (individuals) or $25 million (firms)
• Civil: disgorgement of profits plus penalties up to 3x the profit gained or loss avoided
• SEC Whistleblower Program: 10–30% of sanctions over $1 million

European Union (Market Abuse Regulation — MAR)

• Criminal sanctions: imprisonment (varies by member state, typically 2–5 years)
• Administrative fines: up to €5 million or 3x profits gained (individuals); up to €15 million or 15% of turnover (legal entities)

• Trading windows and blackout periods — restrict insider trading during sensitive periods
• Pre-clearance — require insiders to get approval before trading company securities
• Insider lists — maintain and update lists of people with access to MNPI
• Information barriers (Chinese walls) — separate departments with MNPI from trading functions
• Training — regular mandatory training on MNPI rules for all employees
• Surveillance — monitor employee trading for suspicious patterns
• Restricted lists — securities that employees cannot trade

• US Securities Exchange Act § 10(b) and Rule 10b-5 — primary US anti-fraud provision
• EU Market Abuse Regulation (MAR) No. 596/2014 — EU insider trading regime
• UK Financial Services Act 2012 — criminal insider dealing
• Dodd-Frank Act — SEC whistleblower incentives for insider trading tips