Insider trading is a crime in the United States and a conviction can be accompanied by a variety of penalties including lengthy prison sentences, millions of dollars in fines, restrictions on career options, and more. If you are being charged with insider trading, work with a skilled Bergen County criminal defense attorney during your case for experienced representation and legal advice.
Yes, insider trading is illegal and considered a crime. Insider trading refers to buying or selling stock based on information that has not yet been made publicly available. Dealing with stocks is always a gamble because you never know what will happen that could make the value plummet or skyrocket. The stock market is a tricky thing and those who participate in trading do so based on the value of a company, how it has been doing lately, public opinion, new products, etc.
However, when someone is clued into information that has not been released to the public, they have the opportunity to buy or sell stock before others have a fair chance at doing so. Insider trading taints the integrity of these markets and is unfair to everyday investors who do not have access to the same sort of information that insiders do.
At the federal level, the SEC (Securities and Exchange Commission) prohibits the use of confidential information to reap a profit or avoid a loss through trading a company’s stock. At the state level, New Jersey enacted the NJ Securities Act of 1978 which also prohibits fraud related to the purchase or sale of securities. Both of these laws work in tandem to make insider trading illegal in New Jersey.
Insider trading, as established, is the buying and selling of stock based on private information. But who is on the inside? According to the SEC, an insider is an officer, director, 10% stockholder, or anyone who possesses inside information because of their relationship with the company, an officer, a director, or a principal stockholder.
These individuals and their families or friends may get early access to privileged information that influences their decision of whether to buy or sell stock in a particular company.
An important distinction when it comes to insider trading is what material is considered “inside” and what is simply public or up for interpretation. Inside information is anything that has not been released to the public and could reasonably affect the value of a company’s stock or that would influence a person’s judgment when deciding to buy or sell.
Examples of inside information include the following.
The above and more could be considered inside information if there has not been a public announcement. This information could be good or bad, causing an individual to choose to buy more stock in anticipation of the value rising or to sell as they expect it to fall drastically.
© 2025 The Law Office of Kevin T. Conway. All rights reserved.
