What is insider trading?

Insider trading refers to the buying or selling of a company’s shares or other securities by individuals who have access to confidential, non-public information about the company. This information could include upcoming mergers, financial results, or regulatory approvals that may significantly affect the company’s stock price. When insiders such as company executives, directors, or employees use such privileged information for personal financial gain, it is considered illegal and unethical. Insider trading undermines investor trust and the fairness of the market, as regular investors do not have access to the same hidden details. Regulatory bodies such as the Securities and Exchange Board of India (SEBI) or the U.S. Securities and Exchange Commission (SEC) enforce strict laws and penalties to discourage insider trading practices.