Everything else in your company's compliance program (the trading windows, the pre-clearance, the blackout notices) exists to keep you on the right side of one prohibition. You may not trade on material non-public information. It is worth understanding that prohibition directly, in your own name, because the liability is personal. The policy is the company's. The exposure, if you get this wrong, is yours.
What is MNPI
Information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy or sell, the standard the courts have applied for decades. It is non-public until it has been disclosed broadly and the market has had time to absorb it. Put the two together and you have MNPI, information about the company that a reasonable investor would want, that the market does not yet have. The familiar cases are earnings ahead of release, an unannounced acquisition, the loss of a major customer, a clinical result, a coming restatement. The grey zone is real, and "I wasn't sure it was material" is not the comfortable position it sounds like. When you are unsure, you are in the zone the pre-clearance process exists to handle. Use it.
Why trading on it is prohibited
Insider trading law reaches its target by two roads. Under the classical theory, you, as an insider, owe a duty to the company's shareholders, and trading on information you hold because of your position breaches it. Under the misappropriation theory, confirmed by the Supreme Court in United States v. O'Hagan (1997), you can be liable for trading on confidential information in breach of a duty you owe to the source of it, even if you are not trading in that source's securities. The distinction matters less to you than the reach it produces. Between the two theories, the prohibition covers far more situations than "an officer sells his own company's shares before bad news". If you learned something in confidence and traded on it, there is very likely a theory that reaches the trade.
Tipping is trading
You do not have to place the order yourself to be liable. If you pass MNPI to someone who trades on it, you can be liable as a tipper, but only where you receive a personal benefit for the tip, the test the Supreme Court set in Dirks v. SEC (1983) and clarified in Salman v. United States (2016), which held that a gift of information to a trading relative or friend can itself be the benefit. The practical lesson is blunt. Telling a friend, a sibling or a golf partner something material about your company, and watching them trade, is not a favor outside the rules. It is the fact pattern in a large share of the cases.
The perimeter is wider than your own stock
Do not assume the prohibition stops at your company's securities. In SEC v. Panuwat, the SEC advanced a "shadow trading" theory, that an insider who used confidential information about his own employer to trade in the securities of another, comparable company could be liable. The case has run its course at trial without settling the law. An April 2024 jury returned a verdict for the SEC. The district court denied post-trial motions in September 2024. An appeal was noticed in November 2024. The Ninth Circuit heard oral argument on 11 June 2026. As of 18 July 2026 no decision has issued. Treat it as appeal pending, not settled law. But treat the caution as real. "SEC v. Panuwat, shadow trading and your policy" tracks where the case stands and what it means for the policy language that binds you.
Establish the controls
It is easy to read the trading windows and the pre-clearance step as friction. Read them the other way. A trade you make inside an open window, cleared in advance, at a time you certified you held no MNPI, is a trade with a contemporaneous record behind it. A record you can produce is a defense, while one you have to reconstruct is a gap. The company keeps the record of who had access to what information and when, as described in "MNPI handling, who's inside, when, and proving it", and the pre-clearance step captures your certification at the moment you ask, as in "Designing pre-clearance workflows". Neither certifies that a trade is lawful. Both give you evidence of your state of mind at the moment it mattered. That evidence is the thing standing between an awkward question and a serious one.
InsiderList holds the pieces that make that record real (the MNPI matter and its access chronology, the pre-clearance request with its contemporaneous certification, the trading-window calendar that tells you when you are clear) so the company that supports you can show, for any trade, what you knew and when you attested to it. It records the evidence. It does not certify legality, and it should not be described as if it did.
See the record behind a cleared trade kept as evidence rather than reconstructed. Book a demo with our team.
InsiderList is insider trading compliance software used by companies in the UK, Europe, the USA and the UAE. This article is for general information and does not constitute legal advice. For advice on your situation, consult qualified US securities counsel.
