What is it called when individuals trade stocks based on non-public information about a company?

Insider trading occurs when individuals make stock trades based on non-public, material information about a company. This practice is considered unethical and illegal because it violates the principle of fairness in the financial markets, where all investors should have equal access to relevant information. When insiders—such as executives, employees, or other individuals with privileged access—leverage confidential information to trade stocks, they not only gain an unfair advantage but also undermine investor trust in the integrity of the market.

In contrast, other choices such as market manipulation involve artificially inflating or depressing the price of securities through deceptive practices. Illegal trading is a broader term that could encompass various illicit activities, but it does not specifically refer to trading on non-public information. A private offering refers to the sale of securities to a select group of investors rather than the general public and does not involve the misuse of inside information. Therefore, the specificity of insider trading aptly describes the act of trading on undisclosed, material information.