Insider

1. A director, senior officer of a company, or any person or entity that beneficially owns more than 10 percent of a company’s voting shares. Insiders must comply with strict disclosure requirements regarding the sale or purchase of their company’s stock.

The Securities and Exchange Commission has a slightly wider definition of insiders than the one mentioned above. In addition to corporate officers and other top-level company employees, the SEC also considers employees of other companies to be insiders if they are in a position to get sensitive information. Examples would be law firms or banks that work with the publicly traded company.

In some cases, the SEC even considers family and friends of company employees to be insiders. But this is only if the family members or friends receive inside information and then buy or sell company stock.

Defining and listing “insiders” doesn’t serve any practical purpose outside the realm of identifying insider trading. That should be an indication of how seriously the SEC treats the offense.

2. Sociology: A person who is part of the cool group, is in the know, and understands oblique references that others miss. He often shortens words – even simple ones that don’t need to be shortened – because he’s just that cool.

 

EXAMPLE:

A mid-level executive at a bank has a publicly traded company as a client. With his access to the company’s financial data, he infers that the business is about to become very profitable. He briefly considers buying stock before remembering that his relationship to the company makes him an insider.