Protecting Yourself from An Accidental Conviction
You may be surprised to learn that it is possible to commit crimes on accident. Some people unintentionally engage in white collar criminal acts, specifically insider trading, making it increasingly important to address what insider trading is and how to best prevent an accidental accusation.
The FBI defines white collar crimes as a scope of frauds committed by business and government officials that involve deceit, concealment, or violation of trust. Corporate fraud continues to be one of the most common white collar crimes, and as a result, the FBI primarily focuses on the following activities:
- Falsification of financial information
- False accounting entries and/or misrepresentations of financial condition
- Fraudulent trades designed to inflate profits or hide losses
- Illicit transactions designed to evade regulatory oversight
- Self-dealing by corporate insiders
- Insider trading (trading based on material, non-public information)
- Misuse of corporate property for personal gain
- Individual tax violations related to self-dealing
- Fraud in connection with an otherwise legitimately operated mutual hedge fund
- Late trading
- Certain market timing schemes
- Falsification of net asset values
Understanding Insider Trading
People have the potential to accidentally engage in insider trading. According to the US Securities and Exchange Commission (SEC), illegal insider trading refers to buying or selling a security in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security.
In other words, an insider (a person who has access to non-public information) can buy and sell shares as long as their transactions are registered with the SEC, but they cannot profit from non-public information. The SEC observes this activity by monitoring trading volumes when there is no public information about a company’s profitable actions available.
Thus, if the SEC sees a spike in shares for company that hasn’t announced any positive news, then it could be deemed suspicious activity. If the public has no reason to buy shares, then the SEC may believe insiders are committing a white collar crime.
Legal Insider Trading vs. Illegal Insider Trading
While insider trading typically carries a negative stereotype, it is legal under certain conditions:
Legal: When corporate insiders, employees and shareholders buy and sell stock in their own companies and report such transactions to the SEC.
Illegal: When corporate insiders, employees and shareholders buy or sell a security in violation of trust and confidence, while in possession of material, non-public information.
Essentially, you can break the law by accidentally leading your friend into believing your company isn’t doing so well or sharing good news about your company’s new product launch before a public announcement has been made.
For example, let’s say you come home from a long day at work feeling tired and upset. Your roommate, who bought stocks in your company, asks you why you’re upset. You tell them your company just lost a major deal that would’ve been worth millions had it succeeded, and that you did all the hard work for nothing. Little did you know, your roommate sold their stocks and encouraged other friends who bought shares in your company to do the same. You just committed illegal insider trading, which is a white collar offense.
You can also break the law if you’re a banking or government employee who has legal access to a company’s securities trades, but use that material and non-public information for personal gain.
Protect Yourself from An Insider Trading Conviction
There are several ways you can unintentionally commit illegal insider trading, which is why our skilled white collar crimes defense lawyer is prepared to advocate on your behalf. Considering how complicated insider trading crimes can be, we can work tirelessly to find flaws and inconsistencies in the prosecution’s investigation to better protect your freedom and prevent you from suffering unintended consequences. You can count on us to have your best interest in mind from start to finish.
Please call (559) 484-2112 or schedule a free consultation online today!