Insider trading is the practice of buying or selling a publicly traded companys stock or other securities by someone with non-public, material information about the company. Non-public, material information is any information that could substantially impact an investors decision to buy or sell a security that has not been made available to the public. This form of insider trading is illegal and has stern penalties, including potential fines and jail time.

The rules governing insider trading are complex and vary significantly from country to country. The definition of an "insider" can differ significantly under different jurisdictions. Some may follow a narrow definition and only consider people within the company with direct access to the information as an "insider." On the other hand, some may also consider people related to company officials as "insiders".

A company is required to report trading by corporate officers, directors, or other company members with significant access to privileged information to the Securities and Exchange Commission (SEC) . Federal law defines an "insider" as a companys officers, directors, or someone in control of at least 10% of a companys equity securities.

If someone is caught in the act of insider trading, they can either be sent to prison, charged a fine, or both. According to the SEC in the US, a conviction for insider trading may lead to a maximum fine of $5 million and up to 20 years of imprisonment. According to the SEBI, an insider trading conviction can result in a penalty of INR 250,000,000 or three times the profit made out of the deal, whichever is higher.