Insider Trading Under Federal Law
In 2015, Congress amended the Securities and Exchange Act of 1934 to prohibit insider trading. Under this law, those who are convicted face significant jail time and fines, so if you are being investigated by a federal agency for involvement in an insider trading scheme, it is critical to contact a white collar crime attorney, so you can begin formulating a strong defense. An experienced attorney may even be able to get your charges reduced or dismissed.
The Insider Trading Prohibition Act
Under federal law, it is unlawful to purchase or sell any security if the transaction is based upon knowledge or data that the person knows is material inside information. A person can only be convicted of this offense if prosecutors can demonstrate that the material in question falls under the definition of inside information, which means that it is both non-public and obtained:
- Through illegal means;
- Directly or indirectly from an issuer who expects confidentiality or believes that the information will only be used for a business purpose; or
- In violation of a fiduciary duty.
The information in question must also be “material,” which means that it relates to an issuer or to a security, which if made public, would have a significant effect on the security’s price.
Facilitating a Violation
According to the terms of federal law, a person will be presumed to have violated the prohibition against insider trading if he or she intentionally discloses information to someone else that he or she knew was material inside information. In fact, a defendant can be convicted of this offense even if he or she did not know that the information was material or confidential. Instead, prosecutors can obtain a conviction as long as there is evidence that the discloser should have known that the material was inside information. In demonstrating this, prosecutors can take into account the amount of assets under the individual’s management as well as his or her:
- Financial sophistication;
- Knowledge of financial matters;
- Experience in financial matters; and
- Position in the company.
The accused can also have had no legitimate business purpose in disclosing the information. A person can also face charges even if he or she did not sell or purchase the security, but only caused the purchase or sale of the security to take place, entered into an agreement to conduct a transaction, or communicated the information to someone else who actually made the purchase. Furthermore, a person cannot be held liable for violating this law just because he or she controlled or employed a third party who was involved in illegal activity, as long as he or she didn’t participate in, profit from, or induce the unlawful acts themselves.
Call Today for Help with Your Case
Please contact Jeffrey S. Weiner, P.A. Criminal Defense Attorneys at 305-670-9919 to speak with an experienced white collar crime attorney about your own pending insider trading charges and possible defenses. A member of our legal team will help you schedule a free consultation at your earliest convenience.