What Sort of Conduct Qualifies as Insider Trading?
White Collar Criminal Defense By Harvey Binnall PLLC - 2018/11/09 at 06:53pm
If you’ve been accused or charged with insider trading, then you may be feeling confused, anxious, and frustrated by the prospect of criminal litigation. Insider trading accusations can often be unexpected (for example, if you acted on information that you presumed to be public knowledge).
The Securities and Exchange Commission (SEC) has prioritized the prosecution of insider trading violations on account of concerns that insider trading “undermines investor confidence in the fairness and integrity of the securities markets.” Still, despite the fact that prosecutors tend to be quite aggressive in litigating insider trading cases, there’s reason to be optimistic about litigation. Evidence of wrongdoing can be quite slim in most insider trading cases, and further, prosecutors may have to “jump through hoops” and are likely to make a number of blatant assumptions to demonstrate that you have committed a violation.
With the aid of a skilled white collar defense attorney, you can undermine the arguments put forth by the prosecution and — depending on the circumstances — avoid criminal liability altogether.
Basics of an Insider Trading Charge
Stated simply, insider trading involves the purchase and sale of securities on the basis of private, confidential information. Insider trading can affect anyone — from employees to company directors to third-parties with no connection to the company at all.
Suppose that you have a close friend who works as the director of the research lab at a large pharmaceutical company. While socializing with your friend one weekend, he tells you — in confidence — that they are close to completing the development of a drug treatment that will revolutionize the industry. He encourages you to purchase stock in the company ahead of the public reveal. If you invest in stock on the basis of said information, then you could be held criminally liable for insider trading.
Importantly, insider trading requires that the purported violator have actually engaged in trading activity (i.e., buying or selling securities). If the defendant chose not to buy or sell any securities despite having insider information, that is not enough to support a conviction for insider trading.
Common Defenses to Insider Trading
Information Was Public
Prosecutors cannot impose criminal liability where the information at-issue was not actually private. If you can show that the information was known to the public — whether through an official announcement, or through leaks — then you can avoid a conviction altogether. The point of insider trading enforcement is to prevent some investors from obtaining an unfair advantage over others. If information is public, then knowledge thereof cannot create an unfair advantage.
Information Was Immaterial to Trade
Not all “inside” information is relevant, valuable, or will necessarily give rise to liability for insider trading. If the information was immaterial to your trading activity, then you cannot be convicted of insider trading. For example, if your research friend tells you private information about how their boss is being internally disciplined for engaging in harassment, that may qualify as “inside” information, but may not be material to the purchasing/sale decision with regard to company securities.
Consult an Alexandria White Collar Defense Attorney for Guidance
Harvey & Binnall, PLLC is a boutique criminal defense firm located in Alexandria, VA and serving clients throughout Virginia, Maryland, and the Washington D.C. metro area.
Our attorneys have extensive experience representing the interests of those who have been accused and charged with insider trading, from company employees to third-parties. We understand that the government has good intentions — enforcement is aggressive to ensure that investor confidence in the markets is not shaken — but we are also aware of how many innocent traders are prosecuted for activities that are not actually illegal.
Contact us by requesting an appointment online to speak to an experienced Alexandria white collar defense attorney at Harvey & Binnall, PLLC.