"Insider trading" involves the buying or selling of a company's stock or other securities based on material, nonpublic information about the company. Federal law prohibits a director, officer or employee with material, nonpublic information about a company from either (1) buying or selling stock in the company based on that information, or (2) "tipping" others to buy or sell based on that information. It is also illegal for non-employees to trade based on material information that they know (or should know) comes from someone connected to the company who has access to nonpublic information.
Information is considered "material" if (1) a typical investor would consider it important in making an investment decision, and (2) it would significantly alter the "total mix" of information made available about the company. Information is considered "nonpublic" if it has not been released to the investing public or if the market has not had a reasonable amount of time to absorb the information after publication.
Penalties for insider trading are severe. Individuals who engage in insider trading face a fine up to three times the amount gained or the loss avoided by insider trading. Those convicted of a willful violation may be imprisoned for up to 20 years and fined up to $5 million. Insider trading by high-level employees can subject their organizations to fines of up to $25 million, as well as expose the organization and its officers and directors to civil lawsuits. Shareholder class-action lawsuits in such cases often seek damages in the hundreds of millions of dollars.
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This check card is a printable resource with practical advice on how to avoid insider trading.
This multi-jurisdictional InfoPAK provides a Q&A guide to corporate crime, fraud and investigations. The Q&A gives a high level overview of matters relating to corporate fraud, bribery and corruption, ...
This QuickCounsel provides an overview of federal insider trading regulations in the United States. It outlines the differences between legal and illegal insider trading, and discusses regulatory ...
Sample insider trading and disclosure compliance program. Includes designation of certain persons, oversight of policy, appointment of compliance officer, and duties of compliance officer.
Sample insider trading and disclosure policy that includes provisions regarding the applicability of the policy, a general statement, designation of insider trading compliance officer, general policies, ...
Overview of insider trading policy for small companies. Includes information on trading periods, prohibition n certain transaction in company stock, effect of violation of policy, and check with ...
A sample policy for inside trading pursuant to the Rule 10b5-1 Trading Plan. It enables insiders to trade shares of their company stock during periods when they usually are prohibited from trading. ...
Wolters Kluwer Law & Business
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