Definition: Illegal Insider Trading is the trading in a security (buying or selling a stock) based on material information that is not available to the general public.It is prohibited by the US Securities and Exchange Commission (SEC) because it is unfair and would destroy the securities markets by destroying investor confidence.

The CEO was convicted of insider trading because he told his daughter to sell her shares of his company’s stock the day before the public announcement of bad news that caused the stock price to fall sharply.