What term describes using special nonpublic knowledge about a company for profit or gain?

• A. Insider Trading
• B. Fraud
• C. Stock Manipulation
• D. Churning

Answer: (A)

Using information that's not public to gain an advantage in trading securities is insider trading. The essential idea is that someone with material nonpublic information about a company—things that could influence an investor’s decision, like undisclosed earnings, a merger, or a regulatory decision—trades based on that information, or shares it with others who trade. This creates an unfair market edge and undermines the principle that all investors should base decisions on the same public information. Laws against insider trading aim to preserve market fairness and confidence, and they can apply to both direct trading on that information and to tipping others who then trade on it. While fraud is a broader concept encompassing various deceptive practices, and stock manipulation or churning describe different improper behaviors, insider trading specifically targets the misuse of confidential information for personal gain.