Insider trading means making illegal stock market trades by using access to confidential information to your own advantage. High profile cases like Martha Stewart’s have brought increased public attention to insider trading. However since the early 1900s, insider trading has been a concern of American lawmakers.
Even experienced executives may give in to an impulsive decision to profit or avoid loss by making a simple stock trade. However, a bad choice can result in years of incarceration in a federal prison and hundreds of thousands of dollars in fines.
Insider Trading, Defined
When corporate officers, directors, and employees buy and sell stock in their own companies, they are required to report their trades to the U.S. Securities and Exchange Commission.
U.S. laws ensure investor confidence in the fairness of the securities markets, by making it illegal for corporate insiders to make trades that will profit them based on confidential information.
Illegal insider trading occurs when insiders buy or sell a security using nonpublic information that others would not be able to access. Violations can also occur when nonpublic information is tipped so that someone who receives the tip can use it to make a securities trade that is favorable to them.
Examples of insider trading include:
- A corporate director learns important, secret news about her company’s activities and quickly trades her company stock because of this confidential information.
- A corporate employee hears about an upcoming confidential development at his company and immediately tells his father the news so he can sell his stock.
- A lawyer at a firm that works for a public corporation is told confidential corporate news and that same day he trades company securities based on what he heard.
How Insider Trading Is Prosecuted
The SEC has made the prosecution of insider trading violations an enforcement priority. They work with the U.S. Justice Department and local U.S. attorneys to ensure that individuals and corporations that engage in securities trading violations are prosecuted.
Under Section 32(a) of the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002, individuals who are convicted of willfully violating the law can be sentenced to 20 years in federal prison and/or a fine up to $5 million. A corporation can be fined up to $25 million.
Prosecutors will frequently file additional charges such as mail and wire fraud.
How an Experienced Federal Lawyer Can Help
If you are being investigated for insider trading or you suspect you are being investigated, do not delay in consulting with an experienced federal lawyer. At Worgul, Sarna & Ness, Criminal Defense Attorneys, LLC we offer free, confidential legal consultations to help people – even those who have not been formally charged yet – understand their legal options. We know that you might be panicking about what will happen to you, your family, or your company. Let us help you understand the process. In some instances, we are able to help prevent you from being charged at all.
Having an experienced federal attorney on your side during this problematic time means that you have someone to guide you through court appearances and much more. Experienced counsel can provide reassurance about the next steps and what evidence may be brought against you.
As defense attorneys, we are skilled at reviewing evidence and exposing weaknesses. If any evidence was obtained illegally and in violation of your constitutional rights, we will work diligently to have this evidence suppressed. In federal cases, usually, the prosecution does not bring forth formal charges until there is strong evidence. Many times the evidence they have has been gathered for months or even years. Having someone on your side who can review this evidence carefully is very important to building a strong defense for your case.