Final answer:
Insider trading is the illegal practice of trading securities based on nonpublic information and is regulated by the SEC to ensure market fairness. It is different from speculation, which involves taking calculated risks based on market trends and publicly available information.
Step-by-step explanation:
The buying or selling of stocks, bonds, or other investments based on nonpublic information that is likely to favorably affect the price of the security being traded is known as insider trading. This is illegal and considered a serious offense because it gives individuals with privileged information an unfair advantage in the market. The appropriate regulation body for such actions is the Securities and Exchange Commission (SEC), which was established as part of the Federal Securities Act to ensure a fair and transparent market for all participants.
Speculation refers to the practice of investing in risky financial opportunities in the hope of a fast payout due to market fluctuations. Unlike informed decisions made from publicly available information, speculation is based on personal judgments and predictions about market behavior. However, speculation should not be confused with insider trading, which is about exploiting nonpublic, material information.