The dangers of insider trading
An insider is one who has information about a company and makes an exchange based on inside information. This undermines people’s faith in the market and hurts investors who don’t have access to the same information.
The information is the value of the stock and it is illegal to trade if you have non-public information that affects the price or value of a stock. Insider trading penalizes the general business public who speculate on company information trends without actual knowledge. For example, if you, as a company official, knew that a new product would revolutionize the industry and drive up the share prices of your company, and you bought as many shares as you could before the public offering, you would be guilty of inside information. Commerce.
Illegal stocks come into play when you buy or sell a security while in possession of non-public information or material about the shares or the security. This includes trading by those who have a trusting relationship. The SEC has prosecuted insider trading cases against corporate officers, employees, and directors who traded in the company’s securities after learning of significant developments. Friends and business associates of these officers and directors have had lawsuits against them for information provided by persons in a position of trust. If you are an employee of a law, banking or brokerage firm who was given company information and dealt with that information, you have just broken the law.
The use of inside information destabilizes the investor’s safety in the integrity and fairness of the securities markets. SEC agents consider the discovery and prosecution of insider trading abuse to be part of their top enforcement priorities. Investors should be well aware of the dangers of dealing with suggestions from employees or officials who know private information about a company. If you are considering insider trading, be aware that this law carries severe civil and criminal penalties. Prison time is an option and you can be fined that could ruin it.
The use of inside information can also be legal. It is legal when corporate officers, directors, shareholders or employees buy and sell shares within their own companies. They report their operations to the SEC and this information is used to identify companies with high investment potential. The premise: If insiders are buying shares in their own company, they should know that their company is growing upward.
You can trade with confidence using advice or inside information if you can provide proof that the information you received did not influence your decision to trade and that your trade was made in good faith. However, keep in mind that the burden of proof is on your shoulders and it could be very difficult to verify. Keep good records of every conversation you have with runners. Document the suggestions, where they came from, and when you received them.
If you are contacted by a regulatory official regarding your operations, hire a securities attorney before speaking with regulators. Gather all your records and be ready to justify your insider trading.