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Understanding insider trading

As the stock market becomes more and more accessible to the public, many people suffer from a poor understanding of insider trading. While we are used to hearing the term thrown around on television, insider trading remains widely misunderstood. For instance, many people are not actually aware that not all instances of insider trading are illegal.

Legal insider trading can occur when employees or directors of a company buy or sell their own company's stock. It is important to understand that this is not illegal, but still necessitates a proper report to the Securities and Exchange Commission (SEC).

Other types of insider trading, however, are quite illegal. Some types of insider trading involve buying or selling securities in conflict with a fiduciary responsibility you hold, or buying or selling a security based on inappropriate information. While there are many ways that insider trading can occur, it generally involves the buyer or seller making the choice to move securities based on confidential information.

This can include high-ranking members of a company, or someone not directly involved in a particular business or industry, becoming privy to confidential information. It is also important to note that this also applies to government employees who learn of confidential information, especially pertaining to changes in legislation that may affect certain businesses.

If you are concerned that you may have violated insider trading rules, do not hesitate to reach out to an experienced attorney for proper guidance. A strong defense can help ensure that the matter resolves fairly, while protecting your rights and future from any unfair consequences to a simple mistake.

Source: U.S. Securities and Exchange Commission, "Insider Trading," accessed June 16, 2017

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