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Assertive Representation In State & Federal Court

You have reason to be wary of insider trading

| Jun 14, 2018 | Uncategorized

If you work in the financial industry, one of your biggest concerns may be finding yourself under investigation for insider trading. The Securities and Exchange Commission has made a name for itself in putting people in prison for engaging in this activity.

The problem is that even with ever more specific definitions of the crime, it’s still possible that you could make a crucial mistake that leads to a charge of insider trading. With a little knowledge of what it is and how it occurs, you may keep yourself out of trouble.

How does the SEC define insider trading?

According to the SEC, insider trading encompasses any activity involving the buying or selling of a security based on information not available to the public. The person engaging in insider trading is often in a position of confidence or trust and is breaching a fiduciary duty by making the sale or purchase. If someone provides a “tip” to someone else who then buys or sells a security based on that tip, it may constitute insider trading as well. 

The SEC looks at numerous offenses that tend to go along with or constitute insider trading. If you wonder for an instant that the SEC may scrutinize your actions as being less than legal, you may want to rethink your next step.

What actions may raise red flags with the SEC?

In order to remain in compliance with SEC regulations and avoid raising any suspicions, you may want to be aware of the following actions that could prevent you from raising red flags

  • Make sure any information you receive is available publicly. Without a supporting and public source for the information, using it could result in insider trading.
  • Make sure any questions you ask don’t require the other party to reveal information not available to the public. You also don’t want to appear to be looking for such information since you don’t have to go through with a trade to end up accused of an offense connected to insider trading.
  • If the person providing the information breaches a confidentiality agreement or a fiduciary duty in doing so, it would more than likely constitute insider trading to use it.
  • If you receive information that you suspect would violate SEC regulations on insider trading, report it. This protects you from appearing complicit in using the information to gain a market advantage.
  • Don’t repay a favor with information you know would violate insider trading laws if used to buy or sell securities. Even if you don’t make the trades yourself, you may be just as guilty.
  • If you work with a team, make sure everyone understands the rules and policies regarding insider trading.

Even when you remain diligent and careful, you could still end up under suspicion of insider trading. If that’s the case, you may benefit from gaining an understanding of your rights and the legal options available to you.