Legal Definitions - inside information

Inside information refers to significant, non-public details about a company's financial health, market position, or future plans that are obtained from a source within the company or from someone who has a legal obligation to keep that information confidential.

This type of information is considered privileged because it is not available to the general public or to investors who rely on publicly disclosed data to make decisions. Accessing or using inside information for personal gain, particularly in stock trading, is illegal and known as insider trading.

Here are some examples illustrating what constitutes inside information:

• Imagine a senior executive at a large technology company learns, several weeks before any public announcement, that their company is about to acquire a smaller, innovative startup for a substantial sum. This knowledge is inside information because it pertains to the company's market strategy and financial outlay, is not yet public, and was obtained directly from an internal company source.

• Consider a lead scientist at a pharmaceutical firm who discovers that the clinical trials for a new drug have yielded unexpectedly positive results, indicating a high likelihood of regulatory approval and significant future sales. This information, prior to its official release to the public or investors, is inside information. It directly impacts the company's market prospects and financial outlook, is non-public, and comes from an internal source with direct involvement in the research.

• Suppose a partner at a law firm advising a publicly traded manufacturing company becomes aware that their client is about to settle a major class-action lawsuit for a much lower amount than analysts had predicted. This favorable settlement, before it is publicly disclosed, is inside information. It affects the company's financial liabilities and market perception, is not public, and was obtained from a source (the law firm) that owes a strict duty of confidentiality to its client.