Can You Be Charged with a Crime for Insider Trading in New York?

Understanding Insider Trading

Insider trading involves the buying or selling of a publicly-traded company's stock by someone who has non-public, material information about that stock. This practice is illegal because it gives an unfair advantage to those with privileged information, undermining the integrity of the financial markets.

Legal Framework for Insider Trading

In the United States, insider trading is primarily governed by the Securities Exchange Act of 1934 and the Securities and Exchange Commission (SEC) Rule 10b-5. Rule 10b-5 prohibits any act or omission resulting in fraud or deceit in connection with the purchase or sale of any security. The rule applies to both "insiders" (such as company executives) and "outsiders" (such as tippees who receive non-public information from insiders).

Types of Insider Trading

There are two main theories under which insider trading can be prosecuted:

Classic Theory: This involves corporate insiders—such as officers, directors, and employees—who trade the company's securities based on material, non-public information. These insiders have a fiduciary duty to the company's shareholders and must either disclose the information or abstain from trading.
Misappropriation Theory: This applies to outsiders who misappropriate confidential information for securities trading purposes, in breach of a duty owed to the source of the information. This theory was upheld by the U.S. Supreme Court in the landmark case of United States v. O'Hagan.

Penalties for Insider Trading in New York

Insider trading can lead to severe penalties, both at the federal and state levels. In New York, individuals accused of insider trading can face:

Federal Charges: Insider trading is often prosecuted as securities fraud under Title 18, United States Code, Section 1348. Convictions can result in up to 25 years in prison and fines up to $250,000.
State Charges: New York State also has laws against securities fraud, and violations can result in significant fines and imprisonment. The New York Attorney General's Office actively prosecutes cases of insider trading and securities fraud.

Notable Cases and Legal Precedents

Several high-profile cases have shaped the enforcement of insider trading laws:

Ivan Boesky: A prominent stock speculator who paid $100 million in fines and cooperated with authorities to expose other illicit activities on Wall Street.
Martha Stewart: Convicted of insider trading related to the pharmaceutical company ImClone, resulting in her resignation as CEO and a prison sentence.
Raj Rajaratnam: A billionaire hedge fund manager sentenced to 11 years in prison for insider trading, reflecting the government's aggressive stance against such offenses.

Defending Against Insider Trading Charges

If you are accused of insider trading, it is crucial to seek legal representation immediately. Our experienced New York insider trading lawyers at Spodek Law Group can help you navigate the complexities of both federal and state laws. We can work to get your charges reduced or dropped, leveraging our extensive experience in securities fraud cases.

Call to Action

If you or someone you know is facing insider trading charges, don't hesitate to contact us for a free consultation. Our attorneys are available 24/7 to provide the legal support you need. Call us today at 212-300-5196.

Conclusion

Insider trading is a serious offense with severe penalties. Understanding the legal framework and seeking professional legal advice is crucial if you find yourself accused of this crime. At Spodek Law Group, we are committed to providing top-notch legal representation to help you achieve the best possible outcome. Note: This article is for informational purposes only and does not constitute legal advice. Always consult with a qualified attorney for legal matters. For more information, visit our website at Spodek Law Group.