What is insider trading?

Insider trading is illegal in Australia … but what is the definition of insider trading?

The simplest definition of insider trading is taking advantage of information that is not public.

This ‘inside’ information is most often seen as being used to give someone an unfair advantage in the buying or selling of shares or stocks.

Australians are now more likely to personally own shares in companies in which we work or where a member of our family or close friends work. When you include superannuation even more Australians own stocks and shares. Everyone would appreciate knowing ahead of time if a stock is likely to rise, or if it is about to fall.

It is considered natural to ask friends or family who work for companies on the Australian stock exchange for insider information on trading tips of shares. However, could your innocent question over a barbecue of “what’s happening at work?” land you, and your friend, in court facing insider trading penalties? It depends on whether the information being shared is already ‘public’ knowledge. If your friend’s answer convinced you something significant was about to happen and that you should be selling, or buying, shares, then a court may consider it insider trading.

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Written by Mark Streeter

The Director of Streeterlaw, Mark has been practicing Law since 1994. He has attained his Masters of Law in 1999 and in 2006 was awarded his Specialist Accreditation in Commercial Litigation. Mark is a member of ARITA, a graduate of the AICD and a member of AICM. A member of STEP, Mark enjoys working in the area of Wills and Estates. In 2020 Mark is the Chair of STEP NSW.

Call us on 02 8197 0105 to book an appointment with Mark Streeter!