Insider trading might sound as though it’s a crime that affects only the richest investors in the country, but this is not the case. Any investor can become a victim of insider trading.
Understanding the practice and knowing the risks of insider trading is an important part of investing, but it’s not enough to protect everyone. These schemes are often complicated and far beyond anything the average investor would understand.
If you’ve been a victim of insider trading, working with a securities fraud attorney might be your best option for dealing with the situation.
What is Insider Trading?
Insider trading occurs when securities are bought or sold in breach of fiduciary duty or other investment relationship based on trust and confidence based on material, non-public information about the security. Insider trading violations might also include the act of tipping information, trading after you’ve been tipped, or trading by anyone who misappropriates information.
According to the SEC, examples of illegal insider trading include:
- Trading performed by corporate officers, directors, or employees after they learned of significant, confidential corporate developments
- Trading by those who know any of the officers, directors, or employees who shared confidential corporate developments
- Trading by employees of law, banking, brokerage and printing firms based on knowledge they received because of their relationship with a corporation
- Trading by government employees based on information they gained during their employment
- Trading or tipping by political intelligence consultants based on information that wasn’t public that they gained from government employees they know
- Anyone who misappropriates or takes advantage of information from their employers, family, friends, and others that was supposed to be confidential
Insider trading damages investor confidence. It is unfair and lacks integrity. The SEC takes these crimes seriously and considers the practice one of its primary enforcement priorities.
What You Should Know Before Contacting an Insider Trading Lawyer
Most people have heard of insider trading, but not that many understand it until they are affected by it. It’s one of the most common securities fraud crimes and has been linked to everyone from well-known celebrities to the average person down the street.
If you believe you have been victimized by insider trading or you suspect the practice is occurring, you should contact an insider trading lawyer.
What should you know before you reach out to a lawyer?
First, not all insider trading is illegal. Illegal insider trading occurs when the purchase or sale of stock is influenced by knowledge that only a few people inside of a company have access to. It gives traders an unfair advantage and allows them to profit from information.
An example of insider trading would be buying stock in a company by a person who has a relationship with that company and gains knowledge that is not known to the public of a pending merger, pending release of a new product, or positive earnings report.
As an insider, a person is obligated to maintain a fiduciary relationship with a company. An attempt to profit from their relationship puts their own interest ahead of the entity to whom the duty is owed. Even if a person does not have a direct tie to a company – for instance, their spouse or other family member works for the company and shared insider information – they can still commit illegal insider trading.
Essentially, any buying or selling of stock based on information that is not public can be considered illegal insider trading.
If you are aware of an instance of illegal insider trading occurring or you were affected in some way by insider trading, it’s important to contact an attorney to assess your situation.
How Might an Insider Trading Attorney Help Me?
Financial advisors are obligated to protect investors from financial harm. Illegal insider trading can cause harm, even if investors do not lose money. Insider trading damages trust in the investment industry and affects how people invest.
If you believe an advisor or broker has breached his or her duty to protect your financial well-being, or you are aware of a case of insider trading, you might want to contact an insider trading attorney. He or she can assess the information you provide and might determine if a crime was committing.
Contact us to learn more.