Insider Trading
Trading (or tipping others to trade) on material, nonpublic information in breach of a duty; both the tipper and the tippee are liable, and penalties reach treble civil damages plus criminal fines and prison.
On the SIE, the classic stem hands you a fact pattern and asks who is liable or whether a trade is permissible. The “tell” is information that is both material and nonpublic combined with a breach of duty — so an outsider who lawfully pieces it together (mosaic theory, original research) is fine, while an analyst, a friend who got a tip, or someone who traded on MNPI they overheard is not. Watch the tippee chain: a tippee who knew (or should have known) of the breach is liable too, and a tipper can be liable even if they never traded.
The trap is mixing this up with sibling violations that hinge on a different trigger. Front-running turns on knowledge of a pending customer order, not market-moving corporate news; market manipulation creates a false appearance of activity or price rather than exploiting real secret information; unauthorized trading is an authorization failure. Memory hook: insider trading = MNPI (Material, NonPublic Information) plus a duty you broke.
PlayPrepHQ study notes are written and reviewed against primary exam sources. How we create & review content →