What Is Insider Trading?

Investors often hear about a rogue trader who has been caught in the act of "insider trading." But what is insider trading and how do you avoid it?

insider trading written on notebook with financial graphs in background
(Image credit: Getty Images)

In 1986, at the height of a bull market, Dennis Levine, a Wall Street investment banker, was caught red-handed in insider trading. He traded stocks and handed out tips on stocks involved in merger and acquisition activity. Levine pled guilty and cooperated with the U.S. government to bring down a host of insider trading activity across Wall Street.

Since then, there have been others accused of insider trading – most recently British billionaire Joe Lewis, who pled guilty to insider trading charges in early 2024. This often brings activity in this arena to national attention.

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Mark R. Hake, CFA
Contributing writer, Kiplinger

Mark R. Hake, CFA, is a Chartered Financial Analyst and entrepreneur. He has been writing on stocks for over six years and has also owned his own investment management and research firms focused on U.S. and international value stocks, for over 10 years. In addition, he worked on the buy side for investment firms, hedge funds, and investment divisions of insurance companies for the past 36 years. Lately, he is also working as Chief Strategy Officer for a tech start-up company, Foldstar Inc, based in Princeton, New Jersey.