how is insider trading prevented on events like earnings of mega companies such as Nvidia, Apple, Microsoft, Google, etc…? Even layman can think of ways how key people in those companies could earn billions and billions via some sort of nominee figures. So, are they just doing that?
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Everyone is allowed to trade based on info that is available to the public.
‘Insider trading’ means trading based on information that only a few people have. It is illegal because it is an unfair advantage.
When I worked for a large publicly-traded company, and earnings announcements or product announcements were imminent, we had ‘blackout periods’ (a few weeks before & after the announcement) where employees were forbidden from trading in the company’s shares or executing their stock options. If you were caught, that was a terminable offense, and if the sum is large enough, it means an unpleasant visit from the SEC.
That applies to every employee all the way to the CEO, not just the rank and file. Every once in a while, someone high up and wealthy decides they don’t want to take a multi-million financial hit if a bad earnings announcement is imminent and tries to sell stock before the news becomes public. But large sums of money are hard to hide when they leave a paper trail, so they frequently get caught by the SEC. You have to forfeit what you earned, and the additional penalties on top are often very steep.
TL;DR: Insider trading is hard to hide, often caught successfully, and involves losing what you earned with additional big penalties.
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