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Insider Trading Laws, Charges & Statute of Limitations

Understanding Insider Trading

Insider trading can be defined as the process of trading securities or stocks by people who have private information regarding the company or market trends, which isn’t supposed to be accessible to the general public. When such individuals take advantage of their ability to access this information to make huge profits from the stocks or securities, it is considered a breach of their fiduciary duty.

What Constitutes Insider Trading?

An individual may also be convicted of insider trading if they give the non-public information to any of their close contacts. If you receive such information from a family member or friend, you are expected not to use that information to make trades. However, if you can prove that you did not know that the information was non-public before making the trade, you are unlikely to face prosecution.

In most cases, insider trading is treated as a serious federal offense. The reason why it is treated as such is that it disadvantages the other investors in the markets who have no access to such information. However, it has many differences with the other forms of investment fraud. Unlike the other types of investment fraud, insider trading doesn’t target an individual investor. Instead, the person holding the confidential information is able to act upon it, reaping huge profits.

Insider Trading Laws

The SEC utilizes the different federal regulations and statutes to investigate and prosecute insider trading along with other forms of stocks and securities fraud. According to the law, an insider is defined as an officer or director of a publicly traded company. Individuals with an upward of 10% of any of the company’s stocks are also regarded as insiders.

Such individuals have the duty of ensuring trust with the other stakeholders of the company and ensuring that their investments are protected. Using inside information to benefit themselves or their close contacts is therefore considered a breach of this duty. Any other individual who can access such information, including those who get a tip from the officers, directors, or significant shareholders, is considered as insiders as well. They, too, could face prosecution for insider trading.

For the prosecution to be valid, the US government needs to prove that the defendant either bought or sold stocks or securities using non-public information to predict the trends. The prosecutor must also show that the defendant received this information and that it was material and the non-public at the time of use. They must also be able to prove that the data influenced the trade.

The accused individual may be able to make defense by proving that he or she was part of a contract which they entered to buy or sell the securities or stocks in good faith. They must also show that they entered the agreement before acquiring the insider trading information.

Christine Twomey
Christine Twomey
2024-03-21
Just had my Divorce case settled 2 months ago after having a horrible experience with another firm. I couldn’t be happier with Claire Banks and Elizabeth Garvey with their outstanding professionalism in doing so with Spodek Law Group. Any time I needed questions answered they were always prompt in doing so with all my uncertainties after 30 yrs of marriage.I feel from the bottom of my heart you will NOT be disappointed with either one. Thanks a million.
Brendan huisman
Brendan huisman
2024-03-18
Alex Zhik contacted me almost immediately when I reached out to Spodek for a consultation and was able to effectively communicate the path forward/consequences of my legal issue. I immediately agreed to hire Alex for his services and did not regret my choice. He was able to cover my case in court (with 1 day notice) and not only was he able to push my case down, he carefully negotiated a dismissal of the charge altogether. I highly recommend Spodek, and more specifically, Alex Zhik for all of your legal issues. Thanks guys!
Guerline Menard
Guerline Menard
2024-03-18
Thanks again Spodek law firm, particularly Esq Claire Banks who stood right there with us up to the finish line. Attached photos taken right outside of the court building and the smile on our faces represented victory, a breath of fresh air and satisfaction. We are very happy that this is over and we can move on with our lives. Thanks Spodek law 🙏🏼🙏🏼🙏🏼🙏🏼🙌🏼❤️
Keisha Parris
Keisha Parris
2024-03-15
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
Taïko Beauty
Taïko Beauty
2024-03-15
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence. Thank you team!
Anthony Williams
Anthony Williams
2024-03-12
Hey, how you guys doing? Good afternoon my name is Anthony Williams I just want to give a great shout out to the team of. Spodek law group. It is such a honor to use them and to use their assistance through this whole case from start to finish. They did everything that they said they was gonna do and if it ever comes down to it, if I ever have to use them again, hands-down they will be the first law office at the top of my list, thank you guys so much. It was a pleasure having you guys by my side so if you guys ever need them, do not hesitate to pick up the phone and give them a call.
Loveth Okpedo
Loveth Okpedo
2024-03-12
Very professional, very transparent, over all a great experience
Bee L
Bee L
2024-02-28
Amazing experience with Spodek! Very professional lawyers who take your case seriously. They treated me with respect, were always available, and answered any and all questions. They were able to help me very successfully and removed a huge stress. Highly recommend.
divesh patel
divesh patel
2024-02-24
I can't recommend Alex Zhik and Spodek Law Firm highly enough for their exceptional legal representation and personal mentorship. From the moment I engaged their services in October 2022, Alex took the time to understand my case thoroughly and provided guidance every step of the way. Alex's dedication to my case went above and beyond my expectations. His expertise, attention to detail, and commitment to achieving the best possible outcome were evident throughout the entire process. He took the time to mentor me, ensuring I understood the legal complexities involved to make informed decisions. Alex is the kind of guy you would want to have a beer with and has made a meaningful impact on me. I also want to acknowledge Todd Spodek, the leader of the firm, who played a crucial role in my case. His leadership and support bolstered the efforts of Alex, and his involvement highlighted the firm's commitment to excellence. Thanks to Alex Zhik and Todd Spodek, I achieved the outcome I desired, and I am incredibly grateful for their professionalism, expertise, and genuine care. If you're in need of legal representation, look no further than this outstanding team.

In recent years, federal courts and SEC expanded the scope of insider trading to include trades made by regular people who acquired non-public information from a person who was not authorized to possess or share it. They, therefore, warn all investors from making trades based on tips from insider information.

Insider Trading Charges and Sentencing

According to the Securities Exchange Act, individuals who are prosecuted for insider trading or any other wilful act of securities fraud can face up to 20 years in prison. They can also incur a fine of up to 5 million dollars or both. If the individual can prove that they had no knowledge of the violated laws at the time of trading, they may fail to face imprisonment, but the fines still apply. Corporations found participating in insider trading can incur penalties of up to $25 million.

Although the insider trading charge may not fetch a long sentence in itself, it is essential to note that the perpetrators may face accompanying charges like mail and wire fraud, which can bring the sentence to a total of 20 years. Other possible charges include obstruction of justice, racketeering, and tax evasion.

The Statute of Limitations

The Statute of limitations for an insider trading charge is five years. The matter must, therefore, be presented before the court with adequate evidence not later than five years after the individual uses the insider information to make profits from a trade.

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