There are people who have made careers out of providing advice on which stocks to buy and which stocks to sell. These financial advisers base their recommendations on careful analysis of market trends and studying publicly-released data to make educated forecasts. This practice is entirely legal. But when a stock trade is made based on what is referred to as information that is only available to insiders, it is viewed as an unfair and illegal practice known as insider trading. Insider trading is investigated by the Securities and Exchange Commission (SEC), and when it is suspected the agency can pursue civil remedies against those that they suspect. The U.S. Department of Justice is empowered to pursue criminal action of they have evidence that these actions break the U.S. securities laws.
There are certain individuals who are privy to inside information about the companies that they work for, or whose board they sit on. When a company is about to suffer a negative press story or – conversely – about to announce a merger or an innovation, it is likely to have a significant impact on that company’s stock value, and trading on or sharing that information for the purpose of financial benefit is illegal.
Though insiders of a company are permitted to make stock trades for themselves, they are required to disclose them to the SEC. If they make that kind of trade based on information not available to the public, it is viewed as a breach of trust and confidence.
Over the years, many famous individuals accused of insider trading have made headlines. Those who have been found guilty – including Martha Stewart – have been sentenced to prison terms, while others have paid hefty fines. The penalties that each individual faces is generally determined by the court, and is based upon what role you played in the insider trading, as well as on the seriousness of the accusations that the SEC brings against you in a civil action or the federal government files for criminal violations. In the most egregious cases, the government can authorize “treble” damages, which escalates the fines assessed against you to three times the amount of losses avoided or profits gained. There is a maximum fine of $5 million for individuals convicted of criminal insider trading, while for business entities that maximum rises to 25 years. Prison time can be as much as 20 years.
If you’ve been accused of insider trading, you need expert, experienced legal guidance. Contact us today to learn how we can help.