What is insider trading and why is it a crime?

Have you ever found something out shortly before everyone else and have savored knowing that information while everyone else was in the dark? In a nutshell, this is insider trading, though readers of this Baton Rouge criminal defense legal blog deserve a more complete definition of the crime.

Insider trading involves securities, or financial assets such as stocks. When a person who is considered an insider, such as an employee or even a family member of a company’s employee, acquires information about the entity and uses that information to their financial benefit before the information is made public then the crime of insider trading has occurred. One of the most common ways that insider trading occurs is when a person discovers that a company’s stock is about to go up (or down) and buys more shares (or sells their shares) in order to reap a substantial profit (or avoid a significant loss).

While insider trading may seem like a good business practice it is actually a very serious crime. Laws regarding insider trading are intended to keep securities trading fair and to promote justice in corporate practices. A person who is convicted of insider trading can be sentenced to prison and may be required to pay significant fines in order to fulfill their criminal sanctions.

Unlike violent crimes which harm the physical body of an alleged victim, white collar crimes like insider trading are generally financial crimes that allegedly harm the economy and individuals’ opportunities to deal with their money on an equal and even playing field. A charge of insider trading can carry with it very serious penalties, and for that reason people who are facing white collar allegations are encouraged to discuss their legal dilemmas with criminal defense lawyers.

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