Securities trading is heavily regulated, and people who work for companies that issue and trade stocks are required to follow all applicable laws. It can be all too easy to fall afoul of laws and regulations such as those prohibiting insider trading.
Recently, federal prosecutors filed charges against a man they say violated insider trading laws in a series of transactions involving the company he worked for and a company it sought to acquire. According the Department of Justice, the man made more than $550,000 by using confidential information.
An executive with a company called OSI Systems, the man had confidential information about the company’s finances. Prosecutors say that in fall 2015, he had inside information that told him OSI was going to fall short of its earnings estimates the following year. He then used this information to unload 3,000 of his shares in OSI in a “short” sale, netting him more than $400,000 in early 2016. Later that year, prosecutors say, the man bought shares in a company that he knew OSI planned to acquire. Once the acquisition was publicly announced, he sold those shares, netting more than $100,000.
He faces five counts of insider trading and five counts of other securities fraud charges that could land him in prison for the rest of his life. Each count of insider trading alone can result in a sentence of 25 years.
Insider trading is a crime in which a person who has confidential information about a company’s finances uses that information to buy or sell stock. For the purposes of the law, an “insider” can be an executive within the company, an employee, or someone else who has the confidential information. Even friends and family members of executives or employees can be considered as insiders if they have confidential financial information and choose to buy or sell stock based on that information.
People accused of insider trading have the right to a defense, and with the penalties so harsh, it is crucial that they seek out the best defense attorney they can find.