Insider trading happens when an “insider” sells or purchases stocks or other securities based on undisclosed information. Majority of insider trading activities are against the law, and most of them are easily avoidable.
On the other hand, there are some situations wherein businesses and investors might not realize that they’re already performing illegal insider trading.
To that end, below are some insider trading tips you should know about:
- Refrain from trading securities or acting on hot tips from someone else based on secret information.
- Never tell anyone, including your family and close friends, any inside information that they might use for financial gain.
- Don’t recommend any trading action to anyone based on undisclosed company information since you could be held liable for your actions if that individual decides to act as per your “recommendation”.
- Never give out misleading or false information that might come across as insider tips.
- Don’t try to think up of other ways for trading inside information because you might think your plan is clever, but the SEC and the federal government are oftentimes one step ahead of you, warns a top white collar crime lawyer in Houston.
- Always keep any insider information you’ve learned to yourself.
- Bear in mind that a conviction for insider trading carries severe consequences such as restitution to affected individuals, prison time, and costly fines.
- Familiarize yourself with the trading policies of your company or consult the company lawyer before trading securities from your company or a partner company.
- Always stay updated on current trading laws, most especially if you’re a director or officer.
Keep in mind that whether you intentionally used insider information for trading or did it unintentionally, you could face severe consequences. Furthermore, securities law could be extremely complicated and conforming to these laws could be very tedious.
That said, if you find yourself in trouble with the law for alleged insider trading, speak with an experienced defense lawyer to help you out.