What is Insider Trading? Definition or Meaning

In many countries of the world, insider trading is a crime and you could even go to jail for it. Also known as insider dealing, this malpractice revolves around using confidential knowledge to buy or sell securities in a publicly traded firm.

For example…

Martha Stewart, the homemaking guru’s case where she sold her shares in a cancer drug company days before the FDA’s rejection of the drug is often cited as an insider trading example. It was revealed that she and her broker sold four thousand shares at fifty dollars each days before it dropped to ten dollars a share and pocketed nearly two hundred and fifty thousand dollars. They were found guilty of insider trading and Stewart was sentenced to five months in prison and fined thirty thousand dollars.