Legal Definitions - tippee

A tippee is an individual who receives important, confidential information about a company from someone who has a special duty of trust or confidence to that company. This information is not available to the general public and, if known, would likely influence the company's stock price. The person providing the information is often referred to as the "tipper."

Here are some examples to illustrate the concept of a tippee:

• Example 1: The Early Acquisition Tip
  Imagine a senior executive at "Tech Innovations Inc." confides in her close friend, a private investor, about an unannounced plan to acquire a smaller, promising startup. The executive shares this information before any public announcement is made. The friend, upon hearing this, immediately purchases a significant number of shares in the startup company, anticipating a rise in its stock price once the acquisition is revealed. In this scenario, the private investor is the tippee because they received crucial, non-public information about a corporate acquisition from an insider (the executive) who had a fiduciary duty to Tech Innovations Inc.

• Example 2: The Confidential Drug Trial Results
  A lead scientist working for "BioPharma Corp." is privy to the highly positive results of a new drug trial, which are still confidential and awaiting official release. During a casual conversation, the scientist mentions these promising results to their sibling, who is not involved with the company. The sibling then decides to invest heavily in BioPharma Corp. stock, expecting its value to surge once the trial results are made public. Here, the sibling acts as a tippee, having acquired material, non-public information from the scientist, who was in a position of trust and had access to sensitive company data.

• Example 3: The Upcoming Negative Earnings Report
  An accountant preparing the quarterly financial statements for "Retail Giant Ltd." discovers that the company's earnings will be significantly lower than market expectations. Before the official earnings report is released to the public, the accountant shares this confidential information with a neighbor, who then sells all of their shares in Retail Giant Ltd. to avoid potential losses. The neighbor, in this instance, is the tippee because they received critical, non-public information about the company's financial performance from an individual (the accountant) who had a professional duty of confidentiality to Retail Giant Ltd.