Insider trading allegations are among the most common white-collar crimes prosecuted in the United States. Insider trading involves misusing company information to make investment decisions. Executives, shareholders and others with non-public information about businesses can sometimes use that knowledge for personal gain.
They may sell off many of their shares when they know that the organization is on the cusp of filing for reorganization or at risk of a lawsuit brought by frustrated consumers. They might also acquire shares of the business that they help run or another organization because they know about an upcoming merger or business sale.
Frequently, insider trading relates to personal economic activities. However, the party with insider information does not have to directly profit from the situation. They can face criminal charges based on the economic activities of other people.
Sharing information can constitute insider trading
Obviously, the economic activities of those with access to non-public business information is subject to scrutiny in many cases. In fact, when those who play important roles that organizations attend to sell or acquire stock, they often have to make advance disclosures of those upcoming transactions to protect themselves from prosecution.
Some investors, managers and executives have historically attempted to sidestep that scrutiny by sharing information with other people. There have been cases where spouses, siblings or college friends of those with access to non-public information have conducted major transactions before key information became public knowledge.
Those parties buying or selling publicly traded stock often limit their losses or generate substantial profits by leveraging the information provided to them by the party with insider information. Provided that federal regulatory authorities can connect significant trades to executives and others with access to insider information, they may bring charges against the party with access to that information in addition to the people who conducted those transactions.
Even in scenarios where there is no direct evidence of a company insider profiting from transactions, they could still be at risk of criminal charges that carries significant penalties. Developing a defense strategy when facing white-collar criminal charges requires careful preparation. Those accused of insider trading often need help reviewing financial records and planning and appropriate response to the allegations against them, and that’s okay.