The term material information refers to any documents, facts, figures, or data which a reasonable investor would consider significant to their decision to buy or sell a security. Insider trading laws prohibit the buying or selling of a company's stock while in possession of material, nonpublic information.
The Securities and Exchange Commission (SEC) has jurisdiction with respect to the oversight and enforcement of insider trading laws, which were established to protect the integrity of, and promote investor confidence in, the securities market. These laws also prevent insiders from taking advantage of material information that has not been disclosed to other stockholders or the public.
Information is considered material if a reasonable investor would consider it significant to their decision to buy or sell a security. The test for materiality is a facts and circumstances test, there is no formal definition. However, information may be considered material if:
Examples of material information include:
SEC rules prohibit insiders from trading in a company's stock while in possession of material, nonpublic information. In this context, trading is broadly defined as: