Insider trading describes a situation in which someone associated with a public company trades stocks or bonds based on information that isn’t yet public, giving him or her an unfair advantage.
In some cases, insider trading is permitted if certain rules are followed. But when those rules are broken, it becomes criminal insider trading, and the Securities and Exchange Commission (SEC) must investigate it.
Learn about the laws against insider trading, as well as the insider trading penalties you can expect to face if you’re convicted of this crime.
Trading Window for Insiders – When Is Insider Trading Illegal?
Insiders in a company — such as officers, major shareholders, and corporate directors — can trade securities within their own company, but they are required to report their trades to the SEC. If they don’t — and if they use information that is not available to the public to trade securities — this is an insider trading violation.
Tipping someone else off before trading securities can also lead to criminal penalties for insider trading, as can stealing information from a company in order to profit through the stock market.
Laws Against Insider Trading
Most companies have an insider trading policy that is in line with the SEC’s laws against insider trading. More specifically, the law is called Rule 10(b)5-1, which was created in 2000, after the Supreme Court decided on a case called United States v. O’Hagan.
Rule 10(b)5-1 defines insider trading as a transaction made by a person who is aware of important information that is not public, which means he or she is violating the duty to keep that information confidential in order to profit.
Is Insider Trading a Felony?
Insider trading is a white-collar crime that is often prosecuted as a felony. It’s no wonder that the punishment for illegal insider trading often includes jail time and steep fines.
If you want a chance of avoiding or reducing an insider trading prison sentence, you’ll need legal guidance from Houston white collar crimes lawyer, Seth Kretzer. Contact our firm today to start your case.
Criminal Insider Trading Penalties
If you’re being investigated by the SEC, insider trading penalties may be on your mind. Note that these penalties typically include both jail time and fines.
The maximum criminal fine you might be facing is $5 million, while the maximum fine for the corporation involved is $25 million. Note that if you can prove you didn’t know you were breaking the law, your insider trading punishment will likely only involve the fine and not jail time.
Insider Trading Jail Time
If you’re found guilty of insider trading, you could get up to 20 years in federal prison. This is why it’s so important to hire a lawyer, so you can improve your chance at winning the case or keeping your insider trading jail time to a minimum. Contact Seth Kretzer today to obtain the services of an experienced federal criminal defense lawyer in Houston.
Insider Trading Sentencing Guidelines
As you start your case, you should know that insider trading sentencing guidelines have gotten stricter over the years. In the 1990s, the median insider trading sentence was less than one year in jail. The median increased to 18 months in the early 2000s. Now it’s closer to three years in jail, underscoring the need for legal guidance if you’ve been charged with insider trading.
SEC Statute of Limitations
The SEC statute of limitations defines how long the SEC has to pursue suspects of insider trading and other financial crimes. In short, the SEC statute of limitations is five years after the violation occurred.
If the SEC is investigating you, it’s critical that you get legal help from an experienced attorney as soon as possible. Contact the Law Offices of Seth Kretzer to start your case today.