Legal Dictionary of Pakistan

insider trading

The use of material, nonpublic information in trading the shares of a company by a corporate insider or other person who owes a fiduciary duty to the company. ( This is the classic definition. The Supreme Court has also approved a broader definition, known as the "misappropriation theory": the deceitful acquisition and misuse of information that properly belongs to persons to whom one owes a duty. Thus, under the misappropriation theory, it is insider trading for a lawyer to trade in the stock of XYZ Corp. after learning that a client of the lawyer's firm. is planning a takeover of XYZ. But under the classic defmition, that is not insider trading because the lawyer owed no duty to XYZ itself. - Also termed insider dealing.