Insider Trading occurs when actual insiders, constructive insiders, certain outsiders, and tippers/tippees trade on the basis of material, non-public information. Below, I discuss the definition of each category of trader that can be implicated with a 10b-5 violation of insider trading.
Actual Insider: This is the most basic and straightforward category of insiders–this refers to members of the Board of Directors, the officers and members of management positions, controlling shareholders, and even employees that are privy to material non-public information resulting from their position as a corporate insider.
Although this may seem surprising, the Supreme Court did not address insider trading it handled the case of Vincent Chiarella–a markup man at a financial printing shop that was able to decode the target company in a takeover bid (it is common for corporations to use codenames like “Pinewood” or “Spruce” to maintain secrecy during takeover preparations and submit the true names … Read the rest of this article!