10 Things You Must Know About Insider Trading

If you’re an active investor who occasionally buys or sells stocks based on tips, you need to know what's allowed -- and what can land you in jail.

If you’re an active investor who occasionally buys or sells stocks based on tips, you need to know what's allowed -- and what can land you in jail.

After all, the headlines are rife these days with Washington, D.C. power brokers who have brought the wrath of the Securities and Exchange Commission down on their heads.

In the highest-profile case of alleged insider trading these days, the Department of Justice is investigating Sen. Richard Burr for a series of stock sales he made after attending private coronavirus briefings. A week later the stock market tanked.

The investigation of Burr came hard on the heels of the resolution of the Chris Collins scandal. In January, the former congressman received a 26-month prison sentence and a $200,000 fine.

While in office, Collins fed information he received as a board member of biotechnology company Innate Immunotherapeutics to help his son and others avoid thousands of dollars in losses after one of the firm's drugs failed a clinical trial.

Insider trading is a complicated subject where gray areas abound. In many cases, it is perfectly legal (although potentially unwise) to trade on tips that you hear or overhear. Illegal insider trading all comes down to the facts and circumstances.

Have a look at 10 scenarios that illustrate the dos and don'ts of using insider information.

Dan Burrows
Senior Investing Writer, Kiplinger.com

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.