What Are the Types of Insider Trading?

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The two types of insider trading are illegal and legal. Illegal trading is when an investor has insider information about a company that the public does not have. Find out how legal insider trading involves the people who run and work at a publicly traded company with information from a financial consultant in this free video on insider trading.

Part of the Video Series: Money Management & Personal Finance
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Video Transcript

Do you think you know something about a company that the general public does not? If that company is publicly traded, that may very well be insider information, which would result in insider trading. Hi, this is Roger Groh of Groh Asset Management. We're here to talk about the types of insider trading -- what's legal and what's not. First, on the illegal side. If you have information about a company that the general public does not, then that is illegal. If you have bought or sold stock as a result of having that information, that is also illegal. The Securities and Exchange Commission in the United States has clearly laid out rules, which says that information must be disseminated all at the same time. So in today's perfect world, nobody knows more than anyone else. On the other hand, within a company, the insiders -- the people who either run the business or control large parts of the business -- frequently buy and sell stock on their own. That's perfectly legal, as long as it's done within the guidelines and time frames that the Securities and Exchange Commission has set up. For specifics on those guidelines, go to sec.gov. That's the website of the United States Securities and Exchange Commission, and they lay out very clearly in there what you can or cannot do, and what you can and cannot say. What should you do if anybody ever told you that they have inside information? Well, first of all, walk away. Second, report it to the SEC. You can call them. They're in most major cities. And I'm sure they'd like to hear from you. Hope that helps. This is Roger Groh of Groh Asset, and thank you very much for spending time with me.

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