Common Defenses Against Accusations Of Insider Trading

18 November 2020 by Jonathan Phillips

There are ongoing efforts by the US government to combat incidents of insider trading. If you are accused of this practice, you may be convicted and find yourself with a substantial sentence. You will immediately need to get in contact with a securities law attorney who can help you combat this allegation. 

Understanding Insider Trading

In the past, insider trading was widespread and legal. Business leaders were allowed to use the information they had access to in order to buy and sell stocks. The practice involves using information that would not be freely available to the public. You will need to be in a position where you owe a fiduciary duty to the company. Even if you do not turn a profit or if you sell a stock to avoid losses, you will still be considered guilty of insider trading.

Investigations Into Insider Trading

You may be subject to parallel investigations both by the US Securities and Exchange Commission and the U.S. Attorney's Office. When this is the case, you will definitely want to hire a corporate lawyer. If you are charged with insider training, you may face a lengthy jail sentence and expensive fines.

You'll usually know that you are under investigation when you receive a phone call from the SEC and you may be asked questions about your trading activities. However, you can choose to not answer these questions. Additionally, you should immediately get in contact with a lawyer.

Defenses Against Accusations of Insider Trading

Typically, you will need to owe a fiduciary duty to be held responsible for insider trading, and not having this relationship can be used as a defense. However, in some cases, you do not need a fiduciary duty. For example, you might be accused of insider trading after you steal information and then use that information to buy and sell stocks. You may face the additional charge of corporate espionage. 

You may be able to argue that the information that you used was actually freely available to the public. Then, your actions would not be considered insider trading.

Any profits that are made off the sale of the stock must be invested directly into your company to avoid you profiting off of insider trading. Therefore, if you take these steps, this could be used as a defense. Given the penalties you might face, it's essential to work closely with a securities law attorney. Learn more by looking at corporate law sites; why not try these out

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