Insider trading investigations often begin with what appears to be an ordinary stock transaction. However, when regulators believe a trade was influenced by confidential information unavailable to the public, serious criminal allegations may follow.
Federal authorities devote substantial resources to identifying and prosecuting insider trading offenses. Because these cases frequently involve large financial transactions and sensitive business information, they are commonly treated as significant white collar crime matters.
Trading on confidential corporate developments
Corporate officers, directors and employees may gain access to information that could affect a company’s stock price. This may include pending mergers, major contracts, earnings announcements or other significant developments.
Buying or selling securities before that information becomes public may result in insider trading allegations if investigators believe the trade was based on confidential knowledge.
Passing nonpublic information to others
Insider trading liability is not always limited to the person who originally possesses the information. Problems may arise when confidential information is shared with relatives, friends or business associates who then use that information to make investment decisions. Regulators often examine both the source of the information and the person who acted on it.
Using information obtained through professional services
Many professionals encounter sensitive corporate information while performing their jobs. Employees working for banks, consulting firms, accounting firms, brokerage firms and other service providers may gain access to confidential information before it reaches the public. Using that information to purchase or sell securities can trigger both civil and criminal investigations.
Trading on confidential government information
Insider trading allegations may also arise when individuals use sensitive government information for personal financial gain. Government employees and others with access to nonpublic government information may face scrutiny if they make trades based on information unavailable to ordinary investors.
Investigators may carefully review the timing of trades and the individual’s access to confidential information.
Insider trading cases often involve detailed financial records, communications and complex questions regarding access to nonpublic information. Because convictions can carry severe financial and criminal consequences, these allegations are treated seriously by federal authorities. If you become involved in an investigation involving insider trading or another form of white collar crime, seeking legal guidance may help you better understand your rights and potential defenses.
