There have been many high profile insider trading cases that perpetuated through the media in the last decade. This creates an unfair advantage for the market and is treated as a crime. Basically, anyone that makes a profit on information that wasn't released to the public can be held liable for insider trading. Most investors make their predictions of companies' performances legitimately by examining the company's financial releases as well as other items such as press releases and media coverage. Therefore, this creates a sense of unfairness in financial markets. The key concept within the idea of insider trading is that the individual has some kind of valuable information that the public does not have. Paper NOW! There are many other forms of insider trading as well. When a person or individual has secretive information that the public does not have and uses this for personal gain then this can be considered a form of insider trading. Joe's brother would have saved lots of money by selling his stock before the market got the see the company's quarterly filings rather than waiting to the information was released.
For example, if Joe works for a corporation's accounting department and knows that his company is going to post an unexpected loss next quarter and then informs his brother about the loss who consequentially sells his stock the next day. Insider trading occurs when someone has been granted, whether intentionally or unintentionally, knowledge of a company's financial situation before the same information has been shared with the public and then acts on this information for personal gain. An Analysis of Insider Trading and the Related Costs to Society
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