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What you need to know about insider trading - Part I

Most people, given the opportunity, would help out their family and friends if they could. While for some this may be as simple as helping them move, others would like to do more. For some people, making suggestions for stock purchases or giving ideas about good investment opportunities is one way they can help provide their loved ones with more financial security.

Be careful with how you proceed with these kinds of tips though because they could actually lead to litigation down the road. As some of our Florida readers may have already guessed, some tips could actually constitute as insider trading -- a term that generally refers to the illegal purchasing and selling of stock and is a breach of fiduciary duty as well.

To illustrate this point better, take for example a securities trader who works for a large company who has certain information that could influence the purchase or sale of securities. Even though the public has no knowledge of this information, the trader uses that information for self gain and also disseminates the information to others without permission. If this were to happen, the trader could be accused of breaking the law as this constitutes insider trading.

If you're not as familiar with securities law as our firm is, you may not realize that you are breaking the law until you are facing accusations of illegal conduct. You may not even be aware that you could face criminal as well as civil litigation down the road. That's why in an upcoming post, we're going to talk about the possible penalties you could face if you are accused of insider trading.

Source: U.S. Securities and Exchange Commission, "Insider Trading," May 27, 2015

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