The U.S. Securities and Exchange Commission (SEC) strictly penalizes Michigan investors who influence market prices based on insider information that isn’t available to the public. While buying and selling stocks can create shifts in the market that give other investors a heads-up, the emphasis is on fairness to corporations. Without the capital raised through the stock market, many companies would cease to operate. So, by impacting the confidence of investors, the SEC believes insider trading places our economy at risk.
Protecting corporations by ignoring inside scoops
Investors are expected to ignore information that isn’t yet available to the public, even if it means losing a lot of money. Selling off all your stock will drop the value for current investors. However, you can get in trouble for insider trading even if you never make a purchase or sale. You can be found guilty simply for sharing information whether you know it’s private or not.
In the 1980s, a popular newspaper columnist began influencing the market with his stock predictions. The SEC claimed that he’d engaged in insider trading by sharing his column early with a select group of investors in exchange for kickbacks.
Protecting yourself when you’re charged with insider trading
Generally speaking, the authorities have a hard time prosecuting white collar crimes. Being charged is not always a sign that they have the evidence to convict. Many cases are built solely on the prosecution’s ability to negotiate.
Insider trading is one of the more complex crimes in the financial sector. You don’t have to buy or sell securities in order to be found guilty. All the SEC has to prove is that you benefited by influencing the market with information that wasn’t available to the public.