What is insider trading?

On Behalf of | Feb 3, 2021 | White Collar Crime

These days, many people have taken an increasing interest in the stock market. Along with that comes the exploration of the rules, regulations and intricacies surrounding trade. When participating, it is important to know where the law draws lines.

It helps to start by understanding the illegal behaviors in trade and stock markets. One of the most common crimes is insider trading, and it is easier to fall into than you may think.

Illegal insider trading

The U.S. Securities and Exchange Commission defines insider trading in clear terms. Illegal insider trading involves selling or buying securities based on information not available to the public. In short, you use privileged information to make a move before other people know what is happening. This gives you an unfair advantage over anyone who does not have access to the same special information you have.

For example, a government worker makes trades based on information their sector possesses. Someone uses confidential information that their employers, friends or family members have. A corporate employee trades after learning about corporate developments. These all count as examples of insider trading.

What penalties do you face?

These practices unfortunately undermine investor confidence. It casts a shadow of doubt over the integrity and fairness of securities markets. Because of this, people charged and convicted of insider trading often face severe penalties. You could face a maximum of 20 years in prison. For individuals, you also face a maximum criminal fine of up to $5 million.

With such steep consequences, many people facing charges of insider trading turn to professional legal help. They can guide you through this ordeal.


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