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What is insider trading?

On Behalf of | Dec 7, 2019 | White Collar Crimes |

If you work in California, you may have previously heard brief references to someone engaging in insider trading, all while being unsure about what that actually entails. Many legal issues that result from this action can be devastating for both the company and the employees caught up in it. According to Cornell University Law School’s Legal Information Institute, you should never share private information about the business’ stocks or assets with others who do not work for the company or could benefit from knowing the information.

One of the most common ways you could be guilty of insider trading is by giving tips to friends regarding publicly traded stocks. This knowledge is often used in order to buy or sell certain stocks earlier than the general public, which can lead to a large personal profit. Once you share this information with your friend, he or she is also under a penalty if caught. The only real exception is if your friend was not aware of the information being private company property or was lead to believe otherwise.

Another issue is the economic implication insider trading brings. When you know a secret about a company that no one else knows, and you make a large profit off that information, it is unfair to other traders. Since it is an unnatural interruption to regular trading, it is a detriment to the economy.

As an employee, you should understand how insider trading works and why it is unlawful, so you can avoid legal issues. Your company’s private stock information should not be shared, even with close friends. This information is provided for educational purposes and should not be interpreted as legal advice.

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