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What is considered insider trading?

There are many different ways people use their money, but investing it can be one of the best ways to maximize it. Proper investments can result in substantial gains. However, bad investments on the other hand can cause people to lose a lot of money. It is important that people research the various investments before making them to ensure they are making the proper ones.

Some people will use every advantage they have in order to ensure that they are making the proper investments, but it is important that everyone has the same advantages. That is why insider trading is illegal. Most people probably know the term insider trading and also know that it is illegal. There have been some very famous people who have been accused of it in recent years. However, not everyone may know exactly what constitutes insider trading.

Elements of insider trading

Insider trading is when people buy or sell stocks based on confidential/non-public information about the company. Insiders are people who are officers, directors or people who have at least 10% ownership of the company. These people cannot use the confidential knowledge they have to purchase stock. They also must report their trading activities to the Securities and Exchange Commission (SEC).

This rule also applies to friends of insiders who have received confidential information from insiders within a company. If the friends receive confidential information they are bound by the same duties of the insider. If they use it to buy and sell stock, knowing that it is confidential information, they can be charged just like an insider.

They are many people who buy and sell stock on a routine basis. It can be tempting to use information people know personally as an officer of a business or from a tip from an insider, but if people do, they could be charged with insider trading. There can be serious consequences if people are convicted of insider trading, so it is important to have a strong defense. Experienced attorneys understand the potential defenses and could be a useful resource.

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