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What Is Insider Tipping, and How Is It Related to Insider Trading?

UPDATED: March 2022

What Is Insider Tipping and How Is It Related to Insider Trading? – Most people know that insider trading is illegal, and they can get jail time if involved in the act. However, they don’t know that insider tipping is also a form of insider trading and can land you in trouble. Insider tipping occurs when you inform someone of a public company’s information that may move its stock price, motivating them to trade the company’s securities.

What Is Insider Tipping and How Is It Related to Insider Trading?

Such actions are considered illegal because the trader gets a tip-off that gives them an unfair advantage over other investors regarding the movement of the stock price, which will occur when the information becomes public knowledge. Insider tipping can occur on the internet, via e-mail, conventional mail, phone call, or in person. The tipping will be considered illegal if the following occurs:

  • The tipper gains an indirect or tangible benefit from the tip
  • The tipper passes the tip with the knowledge that it will profit the recipient
  • The person receiving the insider information knows that the tipper is breaching their fiduciary duty

You need to understand the role you can play as an insider tipper. Passing on information that directly or indirectly benefits the investor to whom you passed the information is illegal and will subject you to a penalty and jail time.

The SEC Takes Insider Tipper Liability Seriously

You can still be accused of insider tipping, even if you didn’t trade yourself and simply passed on the information to someone else. There have been cases where it is clear that federal prosecutors and the SEC take tipping very seriously, especially when it brings about actions of insider trading. You don’t want to be caught on the wrong side of the law when passing on trading information to someone with the knowledge that they will benefit.

Conclusion to What Is Insider Tipping and How Is It Related to Insider Trading?

Insider trading is already illegal, but when you pass on information that can result in insider trading activity, you are accused of partaking in the same activity. Therefore, you can be held liable and be sent to jail for aiding and abetting insider trading. There have been numerous high-profile cases where people involved in insider trading were caught and punished to the full extent of the law.

If you want to avoid insider tipping, make sure that you understand that you will be committing a crime by sharing any information that can benefit a trader if they take appropriate actions. Therefore, it is best to learn how to avoid insider tipping and stay on the right side of the line when it comes to trading activities.

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Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

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