Program for Allocating Regulatory Responsibilities by the SEC

Insider trading is a serious offense that undermines the integrity of financial markets and can lead to unfair advantages for those with privileged information. In an effort to combat this illegal activity, regulatory bodies such as FINRA have implemented common rules to govern insider trading practices. FINRA is responsible for overseeing the enforcement and investigation of these rules to ensure fair and transparent trading practices.

The rules regarding insider trading prohibit individuals from trading securities based on material nonpublic information, also known as insider information. This type of information gives traders an unfair advantage over the general public, leading to market manipulation and unfair competition. By prohibiting the use of insider information in trading, regulators aim to level the playing field and protect investors from potential harm.

Under the common rules established by FINRA, individuals are required to refrain from trading securities based on material nonpublic information. This applies to anyone who is in possession of insider information, regardless of their relationship to the company in question. By prohibiting the use of insider information in trading, regulators aim to promote fair and transparent markets that are free from manipulation and unfair practices.

Furthermore, the common rules implemented by FINRA also require individuals to maintain confidentiality regarding insider information. This means that individuals who are privy to such information are prohibited from disclosing it to others, as this could lead to further instances of insider trading. By requiring individuals to keep insider information confidential, regulators aim to prevent the dissemination of material nonpublic information that could potentially harm investors.

In addition to prohibiting the use and disclosure of insider information, the common rules established by FINRA also prohibit individuals from tipping others about material nonpublic information. Tipping occurs when an individual shares insider information with others who then use that information to trade securities. By prohibiting tipping, regulators aim to prevent the spread of insider information and further instances of insider trading.

Overall, the common rules governing insider trading play a crucial role in maintaining the integrity and fairness of financial markets. By prohibiting the use, disclosure, and tipping of insider information, regulators aim to protect investors from potential harm and promote a level playing field for all market participants. FINRA’s enforcement and investigation of these rules are essential in ensuring compliance and holding individuals accountable for their actions. Insiders must be vigilant in adhering to these rules to avoid potentially severe consequences and maintain the trust and integrity of financial markets.