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Supreme Court clarifies insider trading rule

If you work for a company that has its stock publicly traded, you are likely well aware that you are prohibited from using confidential information as the basis for buying and selling shares. Doing so is known as insider trading, which is a federal offense.

The reason that such acts are illegal is because members of the general public must trust that they can participate in the market safe in the knowledge that the stock values are not being manipulated and that no other parties have unfair advantages.

But if your job is an important part of your life, you probably talk about it with family and friends. When having such discussions, it is very easy to reveal information that could be the impetus for your friend or family member to purchase or unload shares of your company's stock.

Until very recently, the legality of giving a third party a hot inside tip was in a somewhat gray area. However, the U.S. Supreme Court has broadened and clarified its interpretation of what constitutes insider trading.

As it now stands, if you should give someone information that is otherwise not known to the public and that person acts on that information, you have engaged in insider trading, even if you received no direct financial benefit.

Yet there has been debate as to whether the matter has been completely settled. An attorney whose client was one of the subjects of the case that brought about the new ruling predicts that unless there is an act of Congress that explicitly formalizes an insider trading law, there will still be situations that will have to be settled in court.

Being accused of insider trading can damage your reputation and the reputation of your company. And a conviction could result in fines or even prison time. Therefore, if you are ever charged with insider trading or any other securities-related crime, it is critical that you have an attorney with extensive knowledge and experience handling cases in federal court.

 

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