What is insider trading?
What will be an ideal response?
The definition of insider trading is trading by shareholders who hold private inside information that would materially impact the value of the stock and that allows them to benefit from buying or selling stock. Illegal insider trading also occurs when corporate insiders provide "tips" to family members, friends, or others and those parties buy or sell the company's stock based on that information. "Private information" would include privileged information that has not yet been released to the public. That information is deemed material if it could possibly have a financial impact on a company's short- or long-term performance or if it would be important to a prudent investor in making an investment decision.
Insider trading may also be based on a claim of unethical misappropriation of proprietary knowledge, that is, knowledge only those in the firm should have, knowledge owned by the firm and not to be used by abusing one's fiduciary responsibilities to the firm. Insider trading is considered patently unfair and unethical because it precludes fair pricing based on equal access to public information. If market participants know that one party may have an advantage over another via information that is not available to all players, pure price competition will not be possible and the faith upon which the market is based will be lost.
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Fill in the blank(s) with the appropriate word(s).
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Answer the following statement true (T) or false (F)