Why is trading on undisclosed information punished?

The FSCMA prohibits insiders, such as officers, employees and major shareholders of listed companies, and people who receive information from them, from using material non-public information that significantly affects investment decisions to trade shares, or letting others use it.

Along with market manipulation and fraudulent trading, this is one of the three major types of unfair trading and is heavily punished. People who use information passed on to them by insiders can also be punished, so do not trade on 'inside information' from unclear sources.