Tipping
Tipping occurs when an insider shares material non-public information with someone else, who then trades on that information. Both the tipper and the tippee can be held liable for illegal insider trading.
The Trader's Take
The Signal
Tipping violations can lead to SEC enforcement actions and criminal charges. Understanding tipping helps identify when insider information might be improperly shared, affecting market integrity.
The Noise
Not all information sharing is illegal tipping—only sharing material non-public information with intent to benefit is prohibited.
Actionable Insights
- 1Be aware that insider information can spread through tipping, affecting market fairness.
- 2SEC enforcement actions against tipping can impact company reputation and stock price.
- 3Understanding tipping helps identify potential illegal insider trading patterns.
- 4Companies implement policies to prevent tipping and ensure information security.
Regulatory Context & Context
Common Misconceptions
Not all information sharing is illegal—only sharing material non-public information with intent to benefit.
The tippee can be liable even if they didn't know the information was from an insider.
Tipping requires a personal benefit to the tipper, not just casual information sharing.
Frequently Asked Questions
What is illegal tipping?
Illegal tipping occurs when an insider shares material non-public information with someone who trades on it, and the tipper receives a personal benefit.
Can both the tipper and tippee be held liable?
Yes, both the insider who shares the information (tipper) and the person who receives and trades on it (tippee) can face civil and criminal penalties for illegal insider trading.