Insider
A person with access to material non-public information about a company, including directors, officers, and large shareholders.
What is Insider?
Under SEC rules and federal securities law, an insider is broadly defined as any person who has access to material non-public information (MNPI) about a company—or who has a special relationship of trust with the company. Statutory insiders under Section 16 of the Securities Exchange Act include directors, executive officers, and shareholders owning more than 10% of a company's equity securities; these individuals must report their ownership and any changes within two business days via SEC Forms 3, 4, and 5. Trading on MNPI by insiders or those who receive the information (tippees) constitutes illegal insider trading under Rule 10b-5.
Example
Before a pharmaceutical company announces positive drug trial results, a company director buys 10,000 shares knowing the announcement will send the stock price sharply higher. As a statutory insider with access to MNPI, the director has violated Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5, making this an illegal insider trading offense subject to civil and criminal penalties.
Source: SEC — Insider Trading