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Why is insider trading illegal?

Updated: 4/28/2022
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12y ago

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Insider trading mainly involves a group trading shares based on private company data. This helps the group to make a profit at the loss of other individuals in the market. Example, John Doe is informed by someone from Company X that it lost a lot of money in the last quarter. It is totally unexpected. John decides to sell his Company X shares for $40. After a few days, Company X releses their quarter earnings and the news disappoints investors and its stock value plummets to $20. John makes a profit though while investors will face huge loss which is unacceptable. This is the reason why Insider Trding is illegal.

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12y ago
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