You enter the school spelling bee. And so does your older brother Sam, who's the top-notch linguist in the country. Should you be treated the same? Not fair, is it?
It works the same with securities. When it comes to trading, buying, or selling stocks and other securities, people working inside a company have a leg up when it comes to knowledge of their own company's performance. Why? Because they have special insider information. These people—including C-level officers and board members—are considered affiliated persons, and they have to follow a bunch of extra laws. If these types own more than 10% of their own company's securities, they're considered affiliated investors, and they face even more restrictions.
It all helps level the playing field between insiders and you, the average Joe or Jane investor. Fair? Definitely.
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Finance: What are Insider Trading And th...11 Views
Finance a la shmoop what is insider trading and the securities fraud
Enforcement Act of 1988? all right well the Securities and Exchange Act of 1934
aka the 34 Act made it formally illegal to use inside information in trading
stocks amazingly that used to not be illegal or at least not explicitly so [People gambling]
and it wasn't enforced investing was well a clubby white man's insiders gig
and the boys took care of the boys well since people could make a lot of
money with insider information and thought they wouldn't get caught like [Boy peeing at a urinal]
well who's gonna know that I overheard the CEO of big company talking about a
merger in a Denny's washroom you know some folks pretty much ignored
the law well the 1988 law was basically Congress saying you guys were really [Congressman discussing the 1988 law]
serious about this so this new legislation added some hefty penalties
if you get caught as an inside trader people still trade on insider
information though and they still get caught and they go to jail and they lose [Jail door closes on man]
everything they have so he's got to realize some of us were just born to be
bad...
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