Stock trading involves important information regarding the financial information of different companies. The misuse of this information to make profits is called insider trading. The Securities and Exchange Commission (SEC) has made laws to make sure stock trading is done legally, and nobody gains an unfair advantage. All traders and trading companies must comply with all securities laws. The SEC takes strict action against those involved in insider trading.
Anyone who has inside information about an organization's finances is called an insider. It could be a management employee, a low-level employee, or even a family member of an employee. If the confidential information that is not available to the general public is released by an insider, it qualifies as insider trading. According to the SEC, if a company discloses information to a specific individual, they must also disclose it to the general public.
If you are working at a public limited company and know about its finances, stay vigilant and avoid disclosing it to anyone. If the information you provided is misused for insider trading, you could get in serious trouble. Even if you recommend a trade without providing a reason, it could be considered as insider trading. You should remember all your company policies and SEC rules.
SEC laws are complex and difficult to understand. It is important to understand them completely, especially if you want to trade stocks. If accused of insider trading, you might need to hire an experienced defense attorney to defend you. The attorney will go through your case and devise a strong defense strategy for you.