If you own or plan to buy stock in a company, it is natural to want to know everything you can about how the company is doing. The more information you have, the easier it is to make the right decisions when the market fluctuates.
However, you must be careful with the information you gather. Are you handling public data that everyone has access to, or are you using private company secrets to your benefit? If the latter is the case, you may be guilty of insider trading.
How insider trading happens
While you may not intend to commit this white-collar crime, it is easy to do so accidentally when it comes to trading securities. This is especially the case if you own stock in a company or institution that you work for. Information may appear to be common knowledge when you hear about it every day among your colleagues, but you should consider if outside investors have the same access to these details.
How the law handles insider trading
The Security Exchange Commission (SEC) does not take insider trading lightly. You may face fines up to $50,000, or up to 20 years of imprisonment if the court finds you guilty of this crime. At the same time, there are loopholes that might help you if the SEC brings a case against you. If you can prove that you followed the SEC’s guidelines for insiders, such as filling the right forms and timing your transactions the right way, you may win your case.
When in doubt, it is best to ask trusted officials or a consultant before you trade stock. Caution and foresight can help you make the right moves without risking your freedom.