Legal Definitions - tipper

Definition: A tipper is a person who has access to confidential or insider information and selectively discloses that information for personal gain or trading purposes.

Example: John, an executive at a pharmaceutical company, tells his friend Tom about a new drug that the company is developing. Tom then buys stock in the company before the drug is announced to the public, making a profit when the stock price rises.

Explanation: In this example, John is the tipper because he has insider information about the new drug. He selectively discloses this information to his friend Tom, who then uses it for personal gain by buying stock in the company before the news is made public. This is illegal and unethical behavior.

Another example: Sarah, an accountant at a company, tells her brother about the company's upcoming merger before it is announced to the public. Her brother then buys stock in the company, making a profit when the stock price rises after the merger is announced.

Explanation: In this example, Sarah is the tipper because she has access to confidential information about the merger. She selectively discloses this information to her brother, who then uses it for personal gain by buying stock in the company before the news is made public. This is also illegal and unethical behavior.