Insider trading happens when someone gets stock tips and uses them to execute unfair trades. It’s a type of financial crime, and it can even lead to jail sentences and significant fines. It’s important for investors to avoid being accused of insider trading.
But some people take this too far, and they’re concerned about any stock tips that they get from other individuals. They’re worried that this is going to constitute insider trading because they’re getting advice from someone else, rather than making their stock trading decisions on their own. But should they be concerned?
Knowledge that isn’t available to the public
No, they shouldn’t worry about every stock tip that they receive. They can legally take advice from friends, family members and even professionals. It is not illegal to act on these tips.
When it becomes a problem is when the stock tips are based on knowledge that isn’t available to the public. For example, perhaps the CEO of a company knows that they are about to announce a partnership with another major company – such as a tech startup getting the backing of Microsoft or Apple. The public doesn’t know about this upcoming project, but the CEO knows that the stock is likely to increase in value dramatically as soon as it’s announced. If you get that stock tip before the public information is released, then it could be insider trading.
Your legal options
Even if you have been accused of insider trading or other financial crimes, that doesn’t mean that you are necessarily in violation of the law. It’s very important to know exactly what criminal defense options you have.
