Insider trading is not legal .The trader who do the insider trading use some private information of the company and buy or sell the stocks before this information becomes public.Insider trading can be done by the promoter,director ,broker or any family member or friend of these people.
Insider trading is a crime because they take a huge benefit from the company's inside's
private information.If these people have some information which may proven bad for the company in the future and they know if,this information will become public ,share price will go down then they sell their share at higher price before the information becomes public.
And if they know some information is very good for the company and share price may take a higher pick from this then they buy a huge amount of share before this information becomes public.
Insider trading is a big offense and some countries has made very hard and fast rules for it.
A jury found Rajat K. Gupta guilty of leaking Goldman's private board room discussion to former hedge fund titan Raj Rajaratnam.He was acquitted on account to divulging secret about P&G. Now they are in a big problem.
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