What Is Insider Trading?
Trading securities based on material nonpublic information obtained through a position of trust or responsibility at a company or regulatory agency. It is illegal and enforced by the SEC and DOJ. Even indirect trading (through family members or tipping others) violates insider trading laws and can result in civil penalties, disgorgement, and criminal prosecution.
Insider Trading across 4 exams
Insider Trading appears on the following exams. Each defines it in the context candidates are tested on:
- SIE
- Trading securities based on material nonpublic information obtained through a position of trust or responsibility at a company or regulatory agency. It is illegal and enforced by the SEC and DOJ. Even indirect trading (through family members or tipping others) violates insider trading laws and can result in civil penalties, disgorgement, and criminal prosecution.
- Series 65
- Buying or selling securities using material nonpublic information obtained through one's position or relationship. Federal law prohibits it, and advisers must implement policies preventing themselves and their associated persons from trading on inside information.
- Series 63
- Trading in securities while in possession of material non-public information obtained through a position of trust or fiduciary relationship. State law mirrors federal insider trading prohibitions, and violations can result in civil and criminal liability.
- Series 24
- Trading in securities based on material non-public information, which is illegal under securities laws. Principals must maintain and enforce information barriers (Chinese walls), restricted lists, and blackout periods to prevent illegal insider trading by firm employees and customers.