Insider trading is a term that is often heard in the news, but what does it actually mean? In essence, insider trading refers to the buying or selling of securities by individuals who have access to material, nonpublic information about the company. This can include directors, officers, and employees of the company, as well as their family members and friends. If you are an investor, it is important to be aware of insider trading and how to protect yourself from it. In this blog post, we will discuss what insider trading is and how you can safeguard your investments!
1. What is insider trading, and what are the penalties for getting caught doing it?
The Securities and Exchange Commission in the US defines insider trading as buying or selling shares of stock based on information that has not been made public yet. It’s illegal under both federal law (Section 16(b) of the 1934 Act) and state laws, so you could be charged with a felony if caught doing it. The penalties vary widely depending on whether or not you have any previous convictions, but if convicted as an individual without prior offenses it will usually cost up to five years in prison and/or fines between $25 million-$75 million dollars.
If a company takes part in insider trading, then they could face civil penalties ranging from $100k-$200k per violation.
2. How can you protect yourself from becoming a victim of insider trading schemes?
The best way to protect yourself is by knowing who the insiders are at companies you’re interested in investing with, and monitoring their trading activity. The SEC requires that all directors and executives of publicly traded corporations disclose certain information about their trades within two business days using Form-SEC Form 144 (i.e., “Insider Trading and the Use of Material Nonpublic Information”). You can find this information on the SEC website.
Another way to protect yourself is by investing in mutual funds and exchange-traded funds (ETFs), which are less likely to be impacted by insider trading than individual stocks. Finally, always do your own research before making any investment decisions!
3. What are some tips for spotting suspicious behavior on the part of your stockbroker or investment advisor?
If you feel like something is amiss, there are a few things you can do to investigate:
– Compare the purchase and sale prices of stocks that your broker has recommended. If they bought low and sold high, it could be a sign that they were trading on inside information.
– Request copies of all correspondence between your broker and the company in question. This can help you determine whether or not they had access to material, nonpublic information.
– Contact the SEC and file a complaint. The sooner you report any suspicious activity, the more likely it is that they will be able to investigate and catch the perpetrator.
4. If you think you may have been a victim of insider trading, what should you do next?
You should contact the SEC immediately! You can also report it to your state attorney general’s office and/or file a lawsuit in civil court against the company. Your lawyer will help you decide what steps are best for recovering any losses caused by insider trading schemes. If you believe that there was intentional wrongdoing on behalf of an individual, you may be eligible to receive a monetary award through the SEC’s whistleblower program.
For more information on insider trading, you can visit the following websites:
– Securities and Exchange Commission: Insider Trading
– FINRA Investor Education Foundation: The ABCs of Insider Trading
– Cornell Law School: Understanding Insider Trading
5. Can you get your money back if you lose money as a result of an insider trading scheme that targets individual investors like yourself?
It depends on the specific situation. If you can prove that you lost money because of insider trading, then you may be able to recover some or all of your losses in civil court. The SEC also offers a program for whistleblowers who provide information leading to an enforcement action resulting in monetary sanctions over $1 million. This program pays awards between 10% and 30% of the total sanctions collected. For more information, visit the SEC website.
Insider trading is a serious offense, and it’s important to be aware of the signs that someone may be engaging in this illegal activity. By being informed about what insider trading is and how you can protect yourself, you can help keep yourself and your investments safe. Be sure to stay tuned for more updates and tips from our blog – we’ll continue to provide information that will help you make smart financial decisions.
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