If a person trades on information that hasn’t been released to the public, it’s called insider trading and it’s illegal, says AUT Business School’s associate professor Aaron Gilbert.
For example, if you knew that a company was about to make a takeover offer and you bought shares before that was made public, you could be prosecuted for insider trading.
You’d make a profit because you knew for certain the offer would be made, so you know what the price should be.
Read more about how some stock market trades could put you on the wrong side of the law in a column by Aaron Gilbert for Juno investment magazine
Aaron Gilbert is an Associate Professor in Finance at Auckland University of Technology. He researches in a wide range of areas related to financial markets including law and finance, corporate governance, and KiwiSaver.