If my boss gets in trouble for insider trading, will that affect me?

| May 4, 2021 | White Collar Crimes |

You probably know that insider trading is illegal. When someone trades securities or stock based on material nonpublic information, they are violating the law. That proprietary information is confidential.

Insider trading is not allowed, nor is insider tipping. This is when that same MNPI is shared with others who go on to trade on that information.

Since you own company stock, you might be surprised to find out that you could face insider trading accusations if you use inside information or give away information about your business to others. The reason that this is illegal is because it gives you an unfair investment advantage over other investors, which hurts the fair use of the market.

Insider trading laws and the laws applying to MNPI involve any company you work for as well as any others that you might know through personal or professional relationships. This could be something as nonchalant as being related to someone who works at the company or more direct, like working as a third-party vendor for the company.

Watch out for insider tipping if your boss gives away MNPI

One of the ways you could get in trouble if your boss is accused of insider trading is by giving away that same information to others. You might not know that the information is private, but giving others tips based on it could lead to charges.

For example, if your friend makes a big investment swap because of information that you provide to them about your business, then you may be held accountable when they profit or lose based on that information. In fact, the law can hold you accountable for up to three times the profits or losses as well as disgorgement of trading gains.

It does need to be said that the prosecution has to prove that you breached fiduciary duty. The other parties involved also needed to benefit from the tips received. On top of that, it needs to be proven that you knew the other party would benefit and try to profit from the information.

If you find yourself in a position where your employer is facing insider trading accusations, take that situation seriously. You need to defend yourself to avoid penalties yourself.

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