What defines insider trading?

Insider trading is defined as the act of buying or selling stocks based on non-public information. This typically involves individuals who have access to material, non-public information about a company, such as earnings reports, merger negotiations, or other significant events that might influence the company's stock price. This information is not available to the general public, and trading on it is considered illegal because it violates the principle of fair disclosure, giving certain individuals an unfair advantage over other investors.

The correct answer highlights this crucial aspect of insider trading, as it directly pertains to the unethical nature of using confidential information for financial gain, which undermines investor confidence and the integrity of the securities markets.