Insider Trading vs. Insider Information
In the industry of investing, there is a difference between insider trading and insider information. For example, there was information released about Continental and United Airlines merging in late 2009. At the turn of the year, it was believed that the merger was going to fall through and that the two companies were not going to act upon the merger. By summer of 2010 and the final signing of the legal details (a), the deal went through officially. The acquisition of the added resources, capital, and infrastructure for the two companies would easily drive up the stock price of the new “company” under UAL on the New York Stock Exchange. With this done, insider traders could have acted back when there were rumors assuming the price would have gone up. However, insider informants “said” that the merger fell through and nothing was going to happen. This creates gossip in the trading world and information that an insider can be giving out to friends and family may not be completely accurate since they do not know the full story. Generally, insider traders act upon information that they believe to be true that is not available to the public giving them the upper hand in making profits. Insider informants pass along information in the form of gossip and do not personally buy or sell stock based on projections. Whether or not either party is acting illegally is solely in the hands of the SEC.