What constitutes insider trading?

Insider trading refers to the buying or selling of securities based on non-public, material information about a company. The correct answer is centered around the idea of improper disclosure of confidential information, which plays a critical role in this concept. When an individual who possesses material information that is not available to the public discloses this information to others, it can lead to an unfair advantage in the trading of stocks or other securities.

This improper disclosure often occurs when a person with a fiduciary duty, such as a company executive or employee, shares confidential insights about the corporation's financial status, upcoming significant transactions, or other sensitive matters that could influence investor decisions.

By trading on this non-public information, individuals could significantly influence market conditions and outcomes in a manner that undermines the fairness and integrity of the financial markets. Consequently, such actions are illegal and punishable under securities laws.

Other options, while related to financial practices, do not encapsulate the essence of insider trading. Gaining access to public records is legal and does not involve any insider information. Reporting market activities typically pertains to compliance and transparency and does not imply the use of confidential data. Negotiating investor agreements may involve discussions around terms of investment but does not inherently suggest the misuse of