Warning
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Warning
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Simple English definitions for legal terms
insider dealing
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A quick definition of insider dealing:
Insider dealing, also known as insider trading, is when someone uses secret information that they have about a company to buy or sell its shares. This is not allowed because it is unfair to other people who don't have this information. It is especially wrong if the person who has the secret information is someone who works for the company or has a special duty to keep the information secret. People who are caught doing insider dealing can be punished with fines or even go to jail.
A more thorough explanation:
Insider dealing, also known as insider trading, is the use of confidential information by a corporate insider or someone who owes a fiduciary duty to a company to trade its shares. This information is not available to the public and can give the insider an unfair advantage in the market.
For example, if a CEO of a company learns that the company is about to announce a merger, and they buy shares in the company before the announcement, it would be considered insider dealing. Similarly, if a lawyer learns about a company's confidential information from a client and uses it to trade the company's shares, it would also be considered insider dealing.
Insider dealing is illegal and can result in severe penalties, including monetary fines and imprisonment. The Securities and Exchange Commission (SEC) can order the insider to return any profits made from the illegal trading and may also impose a penalty of up to three times the profit gained or loss avoided.