Insider Trading

If you read the business section, you've probably come across the phrase “insider trading.” It seems like there's always someone going to jail for it or being charged with it. Even Martha Stewart went to prison for insider trading. If you have a corporation, it's important to know what insider trading entails, why it's illegal, and what differentiates insider trading from merely trading stock.

Insider trading is a term that refers to the act of selling a company's stock or securities by someone who has access to information about the company that's not known by the general public. For example: a vice president knows that the CEO is about to step down and that the company's stock will go down as soon as this fact is made public knowledge. If he sells his stock in the company at the higher price to a public that doesn't know the stock will soon be devalued, the vice president has committed the crime of insider trading.

In the United States, it is legal for corporate officers to trade shares of stock in companies, although they must report these deals to regulatory agencies and they must be publicly disclosed. However, there is some controversy over this. Although it is illegal to trade stock and securities with insider knowledge, some argue that key figures of the business have a more in-depth knowledge of the overall health of the company than the public.

Contact Us

When it comes to insider trading, it's better to err on the side of caution. If you have any questions about the legality of your stock trading, contact the Austin business lawyers of Slater, Kennon & Pugh Ltd.LLP, by calling 512-472-2431 today.