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Why insider trading is illegal

On Behalf of | Nov 2, 2020 | White Collar Crimes

Insider trading is considered to have taken place when an individual violates a fiduciary duty by selling or buying a security based on information that is not available to the public concerning that security. People in Oklahoma have likely heard about insider trading scandals and accusations, but they may not be fully aware of what those charges entail. Here is a brief look at the white-collar crime of insider trading.

The legal definition

Cases that have been brought by the SEC concerning insider trading have covered a wide variety of topics. Frequently, corporate officers will buy or sell shares of that corporation based on information that they have received in confidence and that is not available to the general public. Other instances include friends and family members of corporate officers making similar transactions, government employees using classified information and people making transactions based on services that they provided to a particular corporation.

Why is it illegal?

The question often comes about concerning why insider trading is a violation of federal law. After all, isn’t the point of buying and selling stocks and securities to make as much money as possible?

This is a law that is based primarily in ethics. The concept of buying or selling stock based on information that has not been made available to all shareholders within the corporation greatly diminishes the trust that said shareholders will have both in the company and in the securities process as a whole. The process of buying and selling securities only works if people have enough confidence in the validity of that process to continue to risk their own money.

Anyone who finds themselves accused of a white-collar crime such as insider trading is encouraged to obtain legal counsel as quickly as possible. A criminal defense attorney may be able to review the details of the case, negotiate a potential plea deal for their client and represent their client in the event of a trial.


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