The trading of a corporation's stock (or other securities, such as bonds)
by corporate insiders. Corporate insiders include officers, directors, or
persons holding substantial (e.g., more than 5 percent) blocks of the
firm's stock. Insider trading is legal, provided the person making the
trade did not do so on the basis of private information to which the public was
not privy and reported the trade to the Securities and Exchange Commission
(SEC). Conversely, trades by insiders are illegal when they are made with
nonpublic knowledge. Directors and officers (D&O) liability insurance
policies specifically exclude coverage for claims involving damages produced by
illegal insider trading. However, the policies do cover the cost of defending
against allegations of illegal insider trading.