It seems perfectly natural and innocuous that those with the most information would want to profit from it, and doing so isn’t illegal anywhere else. So why is it prohibited to make trades based on information not everyone has? What undesirable thing does this prevent?
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Not a lawyer…
Insiders have fiduciary duty to the company. This means they are required to put the company’s interest above their personal interest in various matters, including trading. Trading on insider information violates this, as it profits the insider above the other shareholders without this information.
Note they are still allowed to trade, but they are subject to some rules (including reporting).
Note also insider trading isn’t just limited to insiders, so based on these grounds the law covers scenarios where material non public information is held by non-insiders.
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