Insider Trading Lawyer / Attorney
What is insider trading?
In some instances, individuals exploit inside information, using it to either make a trade based on material information not available to the public or divulge inside details to friends and family members and use that information to make a profit through securities trading. Information is considered material when there is a substantial likelihood that a reasonable investor would consider such information important in making an investment decision. Any individual with access to this type of information could have a significant advantage and could potentially make larger, and thus unfair, profits than fellow investors.
Insider trading is a form of securities fraud, one of the most prevalent white-collar offenses in the United States. The Securities and Exchange Commission defines the practice as “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, non-public information about the security.”
Is insider trading a financial crime?
Insider trading is a financial crime. The term “financial crime” is generally not found in criminal or penal codes. The statutes combating insider trading fall within financial regulation on the civil side. In the criminal arena these statutes are usually in the section dealing with fraud or an equivalent of fraud. “Financial crime” is a term most often used by commentators and legal analysts.
Can insider trading be legal?
Trading by insiders may be legal if certain criteria are met. There is a general rule of “disclosure or abstain” from trading. It means that someone with material inside nonpublic information must disclose that information to the contra-party before engaging in the trade for it to be a legal transaction. If the prospective trader cannot or will not disclose the information, that person must abstain from trading. Other instances where insiders who possess material nonpublic information may trade include the following:
- Trusts where the insider does not control the trade and does not disclose the information to the trustee and
- A program of regular periodic sales that take place automatically for a certain number of shares without regard to any inside information.
The role of the Securities and Exchange Commission (SEC) in insider trading cases
Insider trading is a felony and a serious offense with criminal and civil repercussions.
The primary enforcement agency for insider trading is the Securities and Exchange Commission.
The SEC is the government body that enforces federal securities law (particularly the Securities Exchange Act of 1934 and the Securities Act of 1933) and has regulatory responsibility over all operating securities exchanges to promote fair market practices. The SEC monitors market movements, identifies potentially unlawful trades, and conducts insider trading and other fraud investigations.
The SEC has civil enforcement jurisdiction. The Enforcement Division of the SEC may seek federal court injunctions against continued illegal behavior along with civil monetary penalties that can be very large. The SEC can also seek administrative penalties through a proceeding within the agency. Criminal enforcement of insider trading is primarily undertaken through the Department of Justice, usually by a United States Attorney’s Office. There are a number of statutes that apply to insider trading, which include securities fraud, mail fraud, wire fraud, conspiracy, money laundering, and specific crimes for violation of securities laws and rules. Far less often, state regulators and prosecutors may act against insider trading. These actions would be under state law and would vary from state to state.
Not all trading by those with inside material information is illegal. For instance, the SEC and/or Justice Department may forgo action where an insider trade resulted pursuant to a binding contract or a written plan for the trading of securities (each a “trading arrangement” and collectively “trading arrangements”) adopted at a time that the trading person was not aware of material non-public information.
Persons associated with any company who have access to insider information about that company may own and trade stocks as long as the relevant information has been made public and proper reporting and disclosure regulations were followed. Failing to do so may result in an insider trading investigation and charge.
What are the sanctions for insider trading?
Sanctions for insider trading may be criminal, civil, or both.
In the realm of criminal penalties, individuals found guilty of insider trading face up to $5,000,000 in fines and/or 20 years imprisonment, while corporations and other business entities convicted of insider trading are liable for a maximum fine of $25,000,000. In the area of civil law enforcement, prosecuted by the SEC, persons found to have violated insider trading laws may become subject to civil sanctions, including injunctions, and may be forced to disgorge any profits gained or losses avoided. The civil penalty for a violator may be an amount of up to three times the profit gained or loss avoided as a result of the violation or $1,000,000, whichever is larger.
How long will you go to jail for insider trading?
The maximum penalty for insider trading in the federal statutes that combat the crime is 20 years. The court will determine the actual sentence after a calculation using the Federal Sentencing Guidelines, which serves to advise the court of the guidelines sentence for the offense. The court is required to consult the guidelines but may impose a sentence above or below the guidelines within the statutory range (0 to 20 years) to fashion a just sentence.
A driving force in determining the sentence is the dollar value loss of the victim(s) attributable to the defendant. Courts impose sentences on multiple counts to run concurrently in most insider trading cases. More rare is the imposition of consecutive sentences, which occurs when a court determines that such sentences are warranted. The imposition of consecutive sentences may significantly increase the period of incarceration.
What do you do if you’re involved in an insider trading charge?
If you, your loved one, or your company are in any way involved in an investigation of insider trading, your first course of action should be to contact a defense lawyer and get legal counsel. Your choice of counsel to represent you in an insider trading investigation can significantly impact your involvement and the result of the case.
Serafini Law Office is your best choice for insider trading representation
Being charged with insider trading or even your involvement in an investigation is difficult and frightening. Serafini Law Office will provide you with the best representation possible.
Richard Serafini served as a senior litigator in the Criminal Division of the United States Department of Justice in Washington. Before that, he worked as a supervisor in the Enforcement Division of the Securities and Exchange Commission and as a civil enforcement attorney. This makes Mr. Serafini a uniquely qualified insider trading defense lawyer, particularly for cases involving SEC civil enforcement proceedings. He also has decades of experience as a private criminal defense attorney, particularly in white-collar crimes and federal insider trading defense. Moreover, he has represented numerous individuals and companies during investigations before the SEC’s Enforcement Division. He will use his extensive experience to help you evaluate each detail of the case and craft the best possible response.
The Serafini Law Office currently offers legal services in the areas of securities fraud and insider trading and does so throughout the United States.
Contact us at (754) 223-4718 for a free and confidential consultation, and we’ll answer any questions you have about the case.
We Proudly Defend Insider Trading Cases in the Following Cities in Florida:
We also serve New York and Pennsylvania.