What You need to Know about Insider Trading

Chances are you have heard about the infamous cases of insider trading. One of the most widely publicized incidents in modern history of this was when Martha Stewart was incarcerated for insider trading. However, while you may know that insider trading is illegal, you may not know exactly what it is, or why it is against the law. In order to ensure that your market activity is inside the boundaries of the current laws, you need to read and make sure you fully understand the details related to insider trading. If you are worried that you, or a person that you know, is involved in insider trading, it is a good idea to seek the services of a Securities Attorney in Sacramento area.

What Exactly is Insider Trading?
The short explanation of insider trading is that it takes place when an investor trades on the market due to knowledge gained from a corporate insider. The long explanation is much, much more complex and difficult to understand.

Insider trading includes both illegal and legal activities. What a number of people do not realize is that the law prohibits any type of corporate insider – which can be anyone that is part of a company from the high up executives to the employees – to purchase or sell stock in their company. In order to be lawful, insiders have to report instances of these trades to the U.S. Securities Exchange Commission. There are some investors that rely on these types of insider trading techniques as hints of what is to come in the market. For example, if a corporate insider decides to purchase stock in their company, they must have knowledge about a development that will result in an increase in the stock value of the company.

Where investors usually go wrong is when they act on private information by selling their security, and thus breaching trust. However, anyone that offers tips or other confidential corporate information with the intent of encouraging some type of securities trade, may also be found guilty of an illegal activity.

The fact is that no matter if you are aware or why the situation is illegal, or not, you can be held liable and face significant fines, as well as time in jail. Contacting an attorney for assistance will help ensure that your rights are protected and that you fully understand the charges you are facing.