These laws are obviously stupid as you mentioned, and should be changed
The simple definition of insider trading should be (as you also mentioned)
Trading based on Unpublished price sensitive data.
Should not matter if the person is relative of the insider or not.
Here is one of the famous case from the USA
In 2009, the director Rajat Gupta (director of Goldman Sachs) gave Raj Rajaratnam insider information about a potential investment being made by Berkshire Hathway
Based on investigation the SEC established that Raj Rajaratnam had traded based on Unpublished price sensitive data, and was later penalised.
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