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2 things to know about insider trading

On Behalf of | Nov 20, 2019 | White Collar Crimes |

Insider trading is not a crime that you may hear a lot about in Louisiana. However, it has had its moments in the spotlight, such as the case of Martha Stewart in the early 2000s. It is a white-collar crime, which means that it relates to business dealings and finances, but it is unusual because it does not follow the general rules that most criminal charges do.

The Street explains insider trading is when you use information to buy or sell on the stock market when that information is not public knowledge. This may seem like a simple definition, but this crime is anything but simple.

  1. The law is vague

When looking at the elements of insider trading, you will see they lack details:

  • You must benefit from a transaction made through the inside information.
  • You must know the information is not public.
  • You must know the information will influence trading decisions.
  • You or the person who gave you the information must have a duty to keep it private.

What defines public is not clear, and court decisions only add to the confusion. It is also not clear what information would constitute a violation. However, court rulings show that something as simple as a rumor could qualify. Furthermore, the benefit you receive does not have to be direct. If you share information with someone and that person uses it to make stock decisions, then this qualifies as beneficial to you.

  1. You can do it by accident

One of the odd things about insider training is that you can do it by accident. There are not many crimes that you can commit without knowing you are committing a crime. This stems from the last element that requires you to know that someone trusted the person who gave you the information to keep it private. It is your responsibility to identify the source of any information you use to make stock market trading decisions.

The ambiguity of the law and the fact that you can do it without even knowing makes insider trading a tricky crime. You may find yourself facing charges for something you never knew was illegal.