The act of buying or selling securities based on non-public information is commonly referred to as insider trading. Insider trading occurs when individuals trade stocks, bonds, or other financial instruments using material, non-public information that has the potential to impact the market value of those securities. This non-public information is typically obtained by individuals who have access to privileged information about a company, such as corporate executives, directors, or employees.
Insider trading is generally considered illegal in many jurisdictions as it undermines the fairness and integrity of the financial markets. It gives an unfair advantage to those with access to the non-public information, while disadvantaging other market participants who are unaware of the information.
Regulatory bodies and securities laws aim to prevent and prosecute insider trading to ensure a level playing field in the markets. These laws require individuals who possess material non-public information to abstain from trading until that information becomes public and is available to all investors. Violations of insider trading laws can result in significant fines, penalties, and even criminal charges.