<P> The rules governing insider trading are complex and vary significantly from country to country . The extent of enforcement also varies from one country to another . The definition of insider in one jurisdiction can be broad, and may cover not only insiders themselves but also any persons related to them, such as brokers, associates and even family members . A person who becomes aware of non-public information and trades on that basis may be guilty of a crime . </P> <P> Rules prohibiting or criminalizing insider trading on material non-public information exist in most jurisdictions around the world (Bhattacharya and Daouk, 2002), but the details and the efforts to enforce them vary considerably . In the United States, Sections 16 (b) and 10 (b) of the Securities Exchange Act of 1934 directly and indirectly address insider trading . The U.S. Congress enacted this law after the stock market crash of 1929 . While the United States is generally viewed as making the most serious efforts to enforce its insider trading laws, the broader scope of the European model legislation provides a stricter framework against illegal insider trading . In the European Union and the United Kingdom all trading on non-public information is, under the rubric of market abuse, subject at a minimum to civil penalties and to possible criminal penalties as well . UK's Financial Conduct Authority has the responsibility to investigate and prosecute insider dealing, defined by The Criminal Justice Act 1993 . </P> <P> In the United States, Canada, Australia and Germany, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors and any beneficial owners of more than 10% of a class of the company's equity securities . Trades made by these types of insiders in the company's own stock, based on material non-public information, are considered fraudulent since the insiders are violating the fiduciary duty that they owe to the shareholders . The corporate insider, simply by accepting employment, has undertaken a legal obligation to the shareholders to put the shareholders' interests before their own, in matters related to the corporation . When insiders buy or sell based upon company - owned information, they are violating their obligation to the shareholders . </P> <P> For example, illegal insider trading would occur if the chief executive officer of Company A learned (prior to a public announcement) that Company A will be taken over and then bought shares in Company A while knowing that the share price would likely rise . </P>

Who is considered an insider in insider trading