Insider Trading: There are two theories of insider trading liability

Classical Theory: The classical theory of insider trading imposes liability on corporate insiders who trade on the basis of confidential information obtained by reason of their position with the corporation. The liability is based on the notion that a corporate insider breaches a duty of trust and confidence to the shareholders of his corporation.

Misappropriation Theory: The misappropriation theory, on the other hand, imposes liability on outsiders who trade on the basis of confidential information obtained by reason of their relationship with the person possessing such information, usually an insider. The liability under the latter theory is based on the notion that the outsider breaches a duty of loyalty and confidentiality to the person who shared the confidential information with him.

Tipee: Not only are the insider and the outsider forbidden from trading on the basis of the confidential information they have received, they are forbidden from tipping such information to someone else, a tippee, who, being fully aware that the information is confidential, does the trading. In other words, the insider and outsider are forbidden from doing indirectly what they are forbidden from doing directly.