Insider trading is the purchase or sale of securities by a person who possesses inside information: information that is material, specific and not yet available to the public, and that would be likely to affect the price of the securities if it were made public.
Why It Is Prohibited
Securities markets depend on investor confidence that all participants trade on the basis of the same publicly available information. Trading on inside information is unfair to other investors, undermines the integrity and efficiency of the market, and raises the cost of capital for listed companies.
Who Is an Insider
Insiders include directors, commissioners, major shareholders and employees of the issuer, as well as persons who obtain inside information through their profession or business relationship, such as lawyers, accountants and investment bankers. Persons who receive information from an insider ("tippees") may also be liable.
In Indonesian Law
Articles 95 to 98 of Law No. 8 of 1995 on Capital Markets, as amended by Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector, prohibit insiders from trading in the securities of the issuer while in possession of inside information, from influencing others to trade, and from passing the information to third parties who may trade. The Financial Services Authority (OJK) investigates, and violations may lead to administrative sanctions and criminal penalties.
In the United Kingdom
Insider dealing is a criminal offence under Part V of the Criminal Justice Act 1993, and the UK Market Abuse Regulation prohibits insider dealing, unlawful disclosure of inside information and market manipulation as civil offences enforced by the Financial Conduct Authority.