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The danger of insider training

On Behalf of | Jul 5, 2022 | White Collar Crimes

In terms of white-collar crime, some crimes can come with heavy penalties that can potentially change a business owner’s life.

One of these white-collar crimes is insider training.

What is insider training?

Illicit insider training involves buying and selling a security while an individual or corporation has nonpublic information. To commit illegal insider training, the individual breaches his or her fiduciary duty. Material information is all information that affects an investor’s decision when it comes to buying or selling security. Non-public information is all information that only a small amount of people know.

When officers in the company learn confidential information about corporate developments and then trade the corporation’s securities, this is insider trading. Likewise, anyone who takes advantage of confidential information to profit may be committing insider trading.

What penalties are you up against if accused of insider trading?

Allegations of insider trading are serious. You could face fines and/or prison time. The Securities and Exchange Commission has various penalties to punish those guilty of insider trading. The maximum prison sentence a person faces is 20 years, whereas the maximum fine for individuals is $5,000,000. For entities, however, the fine is $25,000,000.

In addition to criminal penalties, you may also face civil sanctions. When you violate insider trading laws, you may have to discharge all profits gained and any losses you managed to avoid. You may also have to pay up to three times the profits you gained or the losses you did not suffer due to the violation.

In addition to the individuals caught in violation, the company and other persons in control of the violator may face penalties too. For example, if a company fails to prevent insider trading before it happens, it holds some responsibility.


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