Forms of Insider Trading
Insider trading occurs when a broker has become privy to confidential information and then uses that information to make trades. The Securities and Exchange Commission (SEC) says this is illegal because the information has not been made public for a time period that would allow others to trade based on the tip, giving insiders an unfair advantage over others.
There are many different types of insider trading, and these offenses are usually perpetrated by those who have a relationship with the company in question. Below, we have compiled information about a few of the most widely known forms of insider trading.
Failure to Disclose Confidential Information
When you learn of confidential information that would impact your decision or the decision of the public to trade, simply having this knowledge is not illegal. When you choose to trade without disclosing this information to the public, a crime has been committed.
Coming into this information, you’ll need to either refrain from trading based on the information or disclose the information to the public before you trade—otherwise, you’re breaking the law.
When You Receive Tips
If you knowingly receive an insider trading tip that the informant should not have disclosed to you, and then you trade on the tip, you’re in violation of SEC regulations on insider trading. The only event in which the perpetrator may not be held accountable is if the person who tipped him or her off did not receive any type of compensation or profit from disclosing the information.
You could be guilty of insider trading if someone who has a relationship with a company discloses confidential information to you and, by proxy, you owe the person who gave you the tip confidentiality but choose to trade based on the tip anyway.
Known as misappropriation theory, this would pertain to attorneys who have an obligation to maintain privileged information or anyone else who has a duty to ensure the information remains confidential.
Contact a Securities Fraud Whistleblower Lawyer
For more information about insider trading, or if you have a tip to provide the SEC that pertains to possible insider trading violations, consult with a qualified securities fraud whistleblower lawyer at Meissner Associates. You can fill out the secure contact form below or give us a call at 1-866-764-3100 to schedule your free consultation today.