this is from the SEC website:
Question:
Where can I find rules, restrictions, and penalties for insider trading?
Answer: 11-19-01
"Insider trading" is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders, officers, directors, and employees, buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC. For more information about this type of insider trading and the reports insiders must file, please read our "Fast Answer" on Forms 3, 4, and 5.
Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.
When bringing insider trading cases, the SEC relies on Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In those cases that involve mergers or acquisitions, the SEC may also rely on Rule 14e-3. These broad anti-fraud provisions make it unlawful for anyone to engage in fraud or misrepresentation in connection with the purchase or sale of a security. While they do not expressly refer to insider trading, courts have relied on these provisions in insider trading cases.
Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities. We recently adopted two new rules -- Rules 10b5-1 and 10b5-2 - that clarify when insider trading liability arises in connection with a trader's "use" or "knowing possession" of material nonpublic information and when the breach of a family or other non-business relationship may give rise to liability under the misappropriation theory of insider trading.
Section 21A of the Securities Exchange Act of 1934 sets forth the civil penalties for insider trading. Section 20A of the Exchange Act addresses private rights of actions based on contemporaneous trading.
To learn more about illegal insider trading, please read our "Fast Answer" on that topic . You may also want to read the release adopting Rules 10b5-1 and 10b5-2.