Imagine a boardroom of these corporate executives, along with their lawyers, accountants and investment bankers, plotting and planning to take over a public company. The date is set; an announcement is only a few weeks away. After the meeting is over, many call their brokers and ask them to buy tons of stock in the target company. When the buyout is announced, the stock price skyrockets and investors dump those shares for millions of dollars in profits. Insider trading is perfectly legal. Officers and directors who owe a duty to shareholders have the same right to trade and purchase the stock as the next person. The main difference between legal and illegal insider trading is the motive. What I intend to explain in this article is to investigate the illegal aspects of insider trading and its scandal. What is insider trading? According to Section 10(b) of the Securities Exchange Act of 1934, it is “any manipulative or deceptive device in connection with the purchase or sale of any security.” This decision had a chilling effect at the beginning of this century, before the stock market became such a vital part of our lives. But as the 1960s arrived and illegal internal activities became numerous, the courts were shackled by a vague definition. Members of the judiciary were therefore now forced to interpret “on the fly” since Congress was unable to provide them with a concrete definition. This resulted in two theories of insider trading liability that have evolved over the past three decades through judicial and administrative interpretation. Classical theory and misappropriation theory is the classic concept which is the type of illegal activity that we usually think of when the words “insider”. This theory started from the SEC administrative case of Cady Roberts in 1961. This was the first time the Sec regulated such securities trading by corporate insiders. shares or derivative assets of the company by its officers, directors and other key employees based on information not available to the public. "The Supreme Court formally recognized the classic theory in the 1980 case US v. Chiarella. US v. Chiarella was the first criminal insider trading case. Vincent Chiarella was a printer who put together the coded packages used by companies that were preparing to launch a takeover bid for other companies..