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Know what insider trading is to avoid federal charges

Sep 4, 2020 | White Collar Crimes |

Individuals who own stocks know all about strategizing. Investors often like to buy up shares in new companies when they’re relatively unknown and the stocks are inexpensive. The hope is that the stocks will increase in value. These individuals are also savvy enough to cash in their shares while their value remains high before any significant value drops.

But investors can quickly end up in legal hot water with federal officials if it seems like they know too much about what’s going to happen with the stocks, though.

Insider trading is the phrase that describes the dissemination of nonpublic information about a stock for a profit. Proprietary information such as a company’s impending bankruptcy or a buyout could affect share values. While it may be okay if you know this information and keep it to yourself, if you share it with others before a company shares that news with investors, your actions may violate federal law.

You should also know that you don’t have to use the information you obtain to trade your stocks to land in legal hot water. You may face insider trading charges for merely passing the information on to another person.

Federal officials have become keen on identifying potential insider trading in recent years. They use software to track individuals who may have purchased or sold off many shares shortly before a company makes an important announcement about their future.

It’s instances like these that the U.S. Securities and Exchange Commission and other federal agencies may use to launch an investigation to determine who might have disseminated insider information. They may look at secretaries, board members, attorneys or anyone else they suspect of having done so and prosecute them for their actions.

If you work for a publicly-traded company or know someone who does and you learn information that may either positively or negatively affect the company’s stock value, then it’s best to keep it to yourself. You may face insider trading charges if you allow your knowledge of this information to impact whether you or someone else purchases shares or sells them off.

You’ll want to consult with a white-collar crimes attorney if you’re facing such charges here in Tampa. Your Florida lawyer is key to helping you build a solid defense in your case.

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