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Why is insider trading an issue?

On Behalf of | Mar 11, 2021 | White Collar Crimes |

You may have heard the term insider trading before. You may also understand that it is an issue that can get people into big legal trouble. But what exactly is insider trading? Why is it such a bad thing to participate in?

In addition, what are the consequences if you end up convicted of insider trading? How much can it impact your future?

What is insider trading?

The U.S. Securities and Exchange Commission explains why insider trading poses such a problem. First, a quick overview on the matter. Insider trading happens when someone uses information not available to the public to make a stock decision. For example, say you know that your company will soon file for bankruptcy. You decide to sell your stocks before the value can plummet. This is an act of insider trading. The same goes for passing on private information to others who use it to play the market.

Why is it problematic?

Why is it a bad thing? Simply put, it destroys the faith of investors. If investors do not believe in the fairness and transparency of the market, they will not participate. This can have a domino effect that may affect the entire market, all stocks and everyone who buys and sells them.

If convicted of insider trading, you may face up to 20 years in prison. On top of that, the fine goes up to $5 million for individuals. Needless to say, this has the potential to completely ruin your life. It can throw you into debt and strip away decades of your time. Thus, if you face such charges, you want to contact a legal expert to help you through.