In insider trading cases, who might be liable if a tipper shares confidential information?

In cases of insider trading, both the tipper (the person who shares the confidential information) and the tippee (the person who receives the information) can be held liable for their involvement in the unlawful transaction. This is based on the concept of "tipping" where the tipper can be seen as facilitating the tippee’s wrongful trading activity by providing them with non-public information.

If the tipper shares insider information with the intention of benefiting from the tippee's subsequent trading—whether that benefit is direct (like receiving a stake in profits or compensation) or indirect (like fostering a relationship)—the tipper risks liability under insider trading laws. Conversely, the tippee, who uses that confidential information to trade, also bears responsibility since they are participating in the market based on material non-public information, which undermines the integrity of the financial markets.

Thus, the legal framework assigns responsibility to both parties involved in the chain of passing insider information. This serves as a deterrent against both tipping and trading on confidential information, aiming to preserve fair trading practices and protect investors.