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What are insider trading charges?

| Apr 7, 2021 | Blog, White Collar Crimes |

Insider trading represents a crime rooted in unfairness. Investors want to see a return on a particular asset. When investing in the stock market, the “average investor” in Michigan takes a risk. No one knows what direction a stock will travel. However, a person with inside information could make several profitable stock buys, but doing so might break the law.

Insider trading and non-public information

When someone inside a publicly-traded company learns material facts and non-public information and uses the data to purchase or sell stock, the investor may face insider trading charges. So, if someone inside the company knows a serious scandal may soon erupt decides to dump tens of thousands of dollars in stock, that person may face charges.

Not all insider trading is illegal. Securities Exchange Commission (SEC) rules establish parameters when the trading is legal. Anything outside those rules could lead to federal charges. A conviction for insider trading may lead to a maximum prison sentence of 20 years and a $5 million fine.

Defending insider trading

Insider trading accusations may not always result in a conviction or even formal charges. Like all crimes, guilt beyond a reasonable doubt becomes necessary for a conviction. Prosecutors need to put forth credible evidence the defendant had insider knowledge.

Sometimes accusations are dubious, although weak accusations may lead to charges. Although inside a company, a person might not receive privileged information. The individual makes investment decisions based on generic information. Presenting compelling evidence displaying a legal purchase in court could assist the defense.

Anyone charged with a white collar crime, such as insider trading, could speak with an attorney. A criminal defense attorney might review the case and any evidence to suggest a defense strategy. In some cases, the attorney may negotiate a plea bargain.