An insider is someone who has access to confidential, non-public information about a company, typically a senior executive, director, or employee. They possess knowledge about the company's financial condition, business plans, or significant changes that are not yet available to the general public.
Insider trading occurs when these individuals buy or sell the company's securities based on this privileged information. For example, if an executive knows about an upcoming merger and buys shares before the announcement, this constitutes illegal insider trading.
Insider trading is a serious criminal offense in most countries, punishable by heavy fines and imprisonment. Securities regulators closely monitor trading patterns to detect and prosecute insider trading violations.