Fighting Insider Trading Charges

Insider Trading Charges

When you use confidential or nonpublic information to trade stocks, bonds, or other securities, it’s called insider trading, which is illegal in the United States. Potential penalties are heavy fines, imprisonment, or both.

Since the Securities and Exchange Commission (SEC) punishes illegal insider trading harshly, you need to defend yourself when facing these charges. With an experienced insider trading defense lawyer, you are in a better position to fight for your freedom and avoid hefty fines. That said, insider trading can be legal or illegal.

Understanding Insider Trading Laws

It’s common for insiders to buy and sell shares of their own organization by following specific timing requirements and reporting the trades to the SEC. That’s legal insider trading.

However, insider trading becomes illegal when insiders use material, nonpublic information to reap profits or avoid losses when trading securities. The Securities and Exchange Commission also forbids using such information for tipping off third parties.

Who Is an Insider?

Insiders access confidential business information because of their relationship with the company (or its staff and officials). Examples include directors, stockholders, and company officers.

However, an employee or anyone who accesses nonpublic information directly or indirectly (in the form of a tip-off) can be charged with insider trading violations.

What Is Material, Nonpublic Information?

Corporate secrets or information that has yet to be made public to investors and can influence investment decisions are considered material, nonpublic (inside) information. Examples include a company’s:

  • Loan defaults
  • Gain or loss of a considerable number of business partners, suppliers, or customers
  • Strategic plans, such as proposed or pending mergers
  • New product announcements
  • Management change
  • Patent registrations and regulatory approvals

Charged with Unlawful Insider Trading: What Happens Next?

A charge does not necessarily indicate guilt. You are innocent until proven guilty. For the Securities and Exchange Commission to impose penalties on you, the regulatory body must prove the following:

  • You bought or sold stocks, bonds, shares, or other securities;
  • You owned material, nonpublic information during the transaction;
  • The information was confidential or was not public yet; and
  • Any reasonable investor would consider the information essential in security transactions.

So even if you think there’s no hope or conviction is inevitable, you stand a chance against insider trading charges. A reliable attorney can create powerful defenses in your case to fight back the charges.

After all, leaving your case in the hands of fate can cost your freedom, reputation, and wealth. The consequences are pretty heavy when found guilty.

Punishment for Insider Trading Violations

Violating insider trading laws can result in many years of imprisonment and thousands or millions of fines. According to the SEC, convicts in a criminal insider trading case could serve a maximum of 20 years in prison and up to five million in fines (25 million for entities whose securities are publicly traded).

In addition to imprisonment and hefty fines, the regulatory body can impose civil sanctions on anyone who violates insider trading laws. Violators may be forced to surrender up to three times the profits generated or losses avoided during the security transaction.

Other potential collateral consequences include the SEC barring you from being an insider (e.g., officer or director) of a publicly traded company for a particular time. This could hurt a person’s ability to generate wealth in the future.

Don’t let insider trading charges risk your future, freedom, and hard-earned wealth. Hire a reputable lawyer to fight on your behalf, even if you think your fate is inevitably decided. After evaluating your case, an attorney can develop personalized defenses to suit your situation.

Possible Defenses in an Insider Trading Case

Insider Trading Charges

Because insiders are closely watched on how they buy and sell securities in their own companies, the slightest perception of trading based on nonpublic information may mean having to defend yourself in court…Even if you are innocent.

The good news is that getting charged does not automatically mean you’re guilty. When facing insider trading charges, all is not lost. You can fight back to protect your reputation, avoid time behind bars, and protect your future.

Depending on the facts in your case, a criminal defense attorney at Meltzer & Bell can build a powerful strategy for a fighting chance against the charges. Common defenses in insider trading cases include:

1. The Security Transaction Was Legal

Sometimes, insider trading can be legal. For instance, the law allows insiders to buy and sell shares of their own company, provided they comply with specific timing guidelines and accurately report the transactions to the Security and Exchange Commission.

An attorney can examine your case closely and use facts to prove that the transaction didn’t violate SEC rules. This defense is powerful because SEC Rule 10(b)5–1 allows insiders to trade while following insider trading laws.

2. No Material Information Was Involved

When facing insider trading charges, the information you used to transact must be “material” for the accusations to stand. According to the SEC, the material inside information is anything that could substantially influence the decisions of any reasonable investor when buying or selling securities. Proving no material inside information influenced your trading decisions can be a reliable defense in your case.

3. Material Information  Was Public

Insider training is an offense only if the material information is private (nonpublic). Depending on your case, a lawyer can help gather evidence that material information that guided your trading decisions was widely and sufficiently available for the investing public.

4. No Knowledge of Illegal Insider Trading

The law may not hold you accountable if someone goes through your files without permission and acts on the “tip” acquired from the confidential documents. The person who uses the information to trade is likely the violator. The same may apply when someone overhears a confidential conversation and uses the stolen information to buy or sell stocks.

Contact Meltzer & Bell to Evaluate Your  Insider Trading Case

If you are looking for reliable legal guidance when facing insider trading charges, an experienced attorney from Meltzer & Bell can help you navigate the charges and pursue a positive outcome. Contact us today for a free consultation.

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