Insider trading is a term that we’re all familiar with, but many people are not clear about exactly what it is. People from homemaker doyenne Martha Stewart to Wall Street hedge fund managers and billionaires have ended up in charged or in prison for insider trading. Some knew that they were violating the law, while others didn’t.
Securities laws are complicated. However, if you violate them, it’s a federal crime. According to the Securities and Exchange Commission (SEC), if you receive information that’s not available to the public and you use that information for your own benefit, you have violated the law.
An “insider” is someone who has confidential information about a company’s financial status. That could be an employee, a family member or someone else in that employee’s life. When that “inside” information is used to someone’s benefit in buying or selling stocks, that person could be charged with insider trading.
You can avoid insider trading charges by remembering that that information about the financial status of a company and the status of its stock prices are confidential It’s essential to talk with your company’s attorney if you have any questions about giving information to those outside of the company, You should never trade securities based on any insider information or “hot tips” that you receive from anyone.
Securities laws are complex. However, If you violate them, you can face serious consequences, including jail time and hefty financial penalties. If you find yourself charged with inside trading or any other security crime, you need to seek experienced legal guidance.
Source: FindLaw, “Do’s and Don’ts: Insider Trading,” accessed March 02, 2017