The stock market has many variables and can be daunting for someone without much trading experience. The terms associated with the stock market may be confusing as well. Louisianans may have heard that someone has been accused of insider trading, but be unclear on what exactly this constitutes. Insider trading may be either legal or illegal conduct.
Legal insider trading occurs when corporate officers, directors or employees buy and sell stock of the company for which they work. These kinds of trades must be reported to the Securities and Exchange Commission (SEC). In contrast, illegal insider trading, generally considered a white collar crime, occurs when a person buys or sells a security while he or she knows material information about the security that is not available to the public.
In the event that the SEC believes a person has committed an act of insider trading, it will prosecute an alleged violation. The SEC has prosecuted cases in which corporate officers or employees have traded securities after they have learned of corporate developments that were both significant and confidential. Instances in which friends and family members of officers or directors traded securities have also been prosecuted by the SEC. Even government employees whose employment gave them access to information regarding particular securities have been prosecuted for insider trading by the SEC.
White collar crime charges such as insider trading are complex and serious charges. A target of a federal investigation by the SEC or the Department of Justice should not take such an investigation lightly. Rather, the targeted person should approach the situation carefully and with the benefit of skilled legal counsel.
Source: U.S. Securities and Exchange Commission, “Insider Trading,” accessed June 26, 2015