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Finance Glossary

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Inside Information


Inside information is knowledge you have that lets you invest with an unfair advantage over everyone else.

You might get this information because you work for a specific company or know someone who works for a company (thanks, Mom!). Or you might overhear something that gives you an investment advantage. In any case, using that insider information is illegal and if you're caught, you face jail time.


You happen to be at Verizon having lunch with a buddy who did something bad in a former life and now works in the business development office. While he whines, you leave to take a whiz. While you're standing there streaming broadband, you see the CEO of Verizon (you recognize him from the distinctive comb-over) stand and stream next to you in stereo. He has one hand on the steering wheel and the other is holding his iPhone (white). Its volume is turned up loudly. Nobody else is in the men's room there and you can hear the voice on the other end say, "Okay, it's confirmed. Goldman is committed now to helping you raise $20 billion to buy RIMM/Blackberry." The Verizon CEO says, "I'm very excited. Let's get this process started tomorrow."

Okay, that is inside information. You heard something you shouldn't have heard. You can't short VZ and you can't buy RIMM—at least without landing yourself in the slammer. Neither can any of the people you work with or friends or family. See covered party.

What do you do? You immediately finish the streaming, zip up, wash using soap, and then phone your compliance lawyer and tell him to stop trading in either stock until you can come in and explain all of the facts and details to your compliance lawyers. Inside Information is not illegal to have; it's only illegal to use it as a basis to trade.