What Is Insider Trading?
Minnesota criminal defense attorney Joe Friedberg defines insider trading.
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Insider trading, there are periods of time when people who, on the inside of a company – officers, directors – are prohibited from buying or selling stock. And, basically, that’s a period of time when they know what the quarterly or annual report is gonna show and the public doesn’t. So if they know that the quarter’s been bad and they’re gonna miss the estimates of what they should have done for the quarter, then they would be inclined to sell the stock. The problem with that is that they’re stealing from whoever buys the stock because that person doesn’t have that inside information and, if they did, they wouldn’t buy it. So during those periods of time, insiders cannot transact the stock. There are other prohibitions as well. It’s basically designed so that people who have information that’s not available to the public can’t take advantage of the public by selling or buying the stock.