While often discussed in dramatic television shows or movies, you may not hear about insider trading in your daily life unless you deal with the stock market or the SEC (Securities and Exchange Commission). Insider trading gives certain investors an unfair advantage as it relies on information that is confidential and has not been publicly disclosed. This dishonors the integrity of the stock market. Continue reading to learn about the potential penalties for insider trading and work with a Bergen County criminal defense attorney for skilled representation and legal advice.
Insider trading refers to buying or selling a company’s stock based on information that has not been made available to the public. This type of material information can include anything that might impact an investor’s decision to buy or sell stock. Information that may sway a person to trade stock can include the following and more.
When an individual has access to information like this before it is released to the public, they may make a trade in order to capitalize on their knowledge. For example, consider a pharmaceutical company. If a person receives advanced notice that the FDA denied a new medication that the company was relying on, they may sell their stock while it is high, knowing that it is likely to plummet once word gets out. This is unethical and, for the most part, illegal.
It is important to note that insider trading is generally prosecuted at the federal level by the SEC. However, New Jersey state law also makes it illegal to buy or sell stock based on nonpublic material information. The NJ Securities Act of 1978 prohibits fraud related to the purchase or sale of securities which includes insider trading.
The penalties for engaging in insider trading are severe and any individual convicted of doing so can face substantial fines and imprisonment. These consequences are life-altering. Federal penalties for insider trading include the following and more.
Insider trading is a serious violation and can result in extensive fines and other penalties. It may be tempting to profit off of confidential information but the risks significantly outweigh the rewards. It is important to understand the laws regarding insider trading to avoid participating in actions that can lead to such drastic legal consequences. Reach out to an experienced attorney for legal advice and representation.
© 2025 The Law Office of Kevin T. Conway. All rights reserved.
