Illegal insider trading consists of the buying and selling of security by insiders that have a certain amount of material that is still not released to the public. A security is a type of manageable interests that are a representation of financial value, usually within business; securities have been categorized between debt and equity securities, as well as between bearer and registered securities. The act of insider trading puts a corporation or to be more specific generous stock holders, company owners, and directors into a breach of fiduciary duty. Although we usually hear about the illegal part of insider trading there can also be a legal side of insider training as well. An example of insider trading would be if the CEO of a particular company sells a stock after discovering that the company will be losing a big government contract within the next month.
People within a company buy and sell their stock all the time, although it is usually illegal, insiders can sometimes buy and sell stock within their company. The security exchange commission or the SEC makes sure that these insiders report their actions within two business days that the actual transaction occurred. The SEC is a Government commission created by Congress to regulate the securities and markets within the business world as well as the regulation and protection of the United States corporate takeovers, and is made up of five commissioners appointed by the president and senate. An example of a proper way to show the SEC your transaction would be if an insider sold 10,000 shares on Monday June 12th, he or she would have to report this change by Wednesday June 14th. Changes in insider holdings are sent to the SEC electronically as a Form 4, wh ...