Define insider trading in the context of securities?

Insider trading refers to the buying or selling of a security based on non-public, material information about the company. This activity is considered illegal and unethical because it undermines the integrity of the securities markets, as it gives an unfair advantage to those who have access to confidential information that is not available to the general public.

When insiders, such as executives or employees of a company, trade securities based on this privileged information, they are violating the trust and transparency expected in financial markets. The law mandates that all investors should have equal access to important company information before making investment decisions. This principle ensures that markets function fairly and efficiently, promoting investor confidence.

While various options describe different trading strategies or characteristics, only the one addressing the use of non-public information specifically highlights the essence of insider trading. Trading based on publicly available information, long-term investments, or technical analysis does not constitute insider trading, as these practices adhere to regulations and ethical standards.