According to many, the stock market is the lifeblood of the American economy. The premise is simple, but is immensely complex in its execution: sell a portion of the ownership of a company to raise money. This is great for a brand new company in desperate need of capital. This one idea has allowed for countries like the United Kingdom and the United States to prosper, enabling countless firms to get the money they need to grow into huge, successful firms. It has also allowed untold numbers of Americans to make fortunes due to savvy or lucky investing.
It also has a dark side, as anyone who has paid attention to the events of the past decade is well aware. People game the system, and fortunes are made and lost in the blink of an eye. There are countless schemes, methods, tricks, and conspiracies to artificially boost profits and make bundles of money, regardless of who gets caught in the crossfire. Some of these methods are surprisingly legal—like Goldman Sachs making money on the bet that people would default on their mortgages en masse—but others are definitely, unambiguously illegal, like insider trading.
What is Insider Trading?
Insider trading is a term that everyone has heard but few fully understand. In short, insider trading means buying or purchasing stock on information that the public does not have. A good example comes from the classic film The Big Chill, where a group of college buddies reunites 10 years later for the funeral of one of their friends. One of the group is a successful owner of a grocery store chain and is about to sell his company to a much bigger corporation in about 6 months. He decides to share this information with a friend—who can then buy stock in the grocery store while it is cheap and subsequently sell it when those stocks become much more valuable 6 months from now. Doing that is insider trading.
Insider trading was one of the causes of the great depression and can cause havoc on economies and financial systems. When people trade on the basis of inside information, all sorts of inequalities, corruption, and imbalances emerge. Small surprise that the government takes allegations of insider trading extremely seriously; the entire stability of our economic system can be at stake. The reason for the prohibition on insider trading is that it undermines investor confidence and fairness and integrity of the securities markets.
Penalties and Fines
There are numerous types of actions that can be considered insider trading or “tipping.” If you are being charged with such a violation, you can expect to face federal prosecution. You can face up to 20 years in jail and fines of up to $5 million for each willful violation of the Securities Exchange Act of 1934 which has been supplanted by the Sarbanes Oxley Act of 2002.
Insider trading is no light matter to say the least. It is incredibly easy to do and incredibly tempting as well. However, as sensible as it may seem now, one or two decades behind bars is not worth it. Always conduct your financial dealings with the utmost integrity, or face the consequences.
Who Should I Contact?
If you find yourself in a potentially vulnerable position legally due to stock trading, it is vital you consult a legal professional immediately. Do not wait for the regulators to throw you behind bars; speak to the attorneys at Rosenblum Law so you can protect your rights, interests and your freedom. Call today at 888-815-3649.