SEC Law: Insider Trading
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Articles (Jump to FAQs)
Bruce Brumberg
Whether you think that Martha Stewart is guilty or innocent, or that the government should not have brought criminal charges against her, she made a number of rash mistakes that we all can learn from to avoid civil or even criminal charges of insider trading.
Merrill Freed and Steven Schraibman
Your advisors say now is the time to buy or sell your company stock or to exercise options. But before you proceed, you'd better understand the securities laws that apply. Otherwise, you risk losing your profits, paying big fines, attracting unwanted media attention, and perhaps even going to jail. The storm of controversy over the backdating of stock option grants shows how closely executive stock sales are scrutinized.
Bruce Brumberg
myStockOptions.com
Editor-in-Chief Bruce Brumberg developed this PowerPoint presentation for talks and meetings on insider trading. With colorful examples from recent cases, it covers fundamentals, penalties, Rule 10b5-1 preapproved trading plans, and lessons that the cases of Martha Stewart/ImClone and Joseph Nacchio/Qwest can teach. (Premium members can view the presentation in PDF from the above link and may request permission to use it at their companies. Please allow up to a minute for the presentation to fully appear in your browser.)
Julius Melnitzer
Inside Counsel, 2/08
The SEC's intensified search for insider trading includes enhanced scrutiny of Rule 10b5-1 trading plans.
Bob Drummond
Bloomberg.com, 6/20/07
A large volume of corporate acquisitions and well-timed investments in target companies has set off alarms about insider trading at the SEC and in stock exchanges around the world.
The Economist
CFO.com, 3/13/07
In response to a growing number of egregious cases, the SEC is making insider trading investigations a priority.
Jane Sasseen
BusinessWeek, 6/26/06
The SEC and federal prosecutors are scrutinizing the practice of intentionally granting stock options before a company announces good news. This "springloading" of grants can be considered insider trading.
Kathleen Pender
San Francisco Chronicle, 6/15/03
Know the laws of insider trading before you sell your company stock. Many who have been caught and prosecuted for insider trading did not feel that they were doing anything wrong. It's easy to prevent similar mistakes.
Jeffrey Young
Forbes, 9/29/97
Now an insider can be almost anyone, including contract programmers who overhear conversations in the cafeteria. Be extremely careful in posting comments about company prospects on the internet.
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FAQs (Jump to articles)
Insider trading occurs when someone possesses inside information about an important development at a company and then uses this information to...
Insider trading violates the basic philosophy of fair capital markets...
Generally, there is no violation in receiving a grant of options when you know material nonpublic information. However, a range of other issues can arise, ranging from fiduciary duties to concerns related to backdated or springloaded grants. The SEC is now focused on the practices of...
If you exercise stock options when you know material nonpublic information, the exercise itself is not insider trading, according to most experts. But if stock received at exercise is then...
After the information is publicly disclosed, you should wait a reasonable amount of time for...
Tipping is telling someone material confidential information about a public company, whether in...
Blackout periods are times when you are prohibited from trading your company's securities, and window periods are times when you are allowed to trade. Some companies also prohibit...
Most companies do not prohibit exercises of stock options during blackout periods, because the purchase price...
To prevent insider trading, and to reduce the need to constantly monitor and evaluate...
Most insider-trading cases involve civil suits and penalties...
Anyone found liable for trading on inside information must pay the federal government...
The Justice Department and local United States attorneys' offices, not the SEC, have the authority to bring criminal prosecutions. Under Section 32(a) of the Securities Exchange Act, as amended by the Sarbanes-Oxley Act of 2002, individuals face up to 20 years in prison for criminal securities fraud and/or fines of up to $5 million for...
The rules do not apply only to trades in your company stock while you are working for the company...
Using a blind trust goes beyond the protections of Rule 10b5-1 plans, yet has more restrictions. These are irrevocable grantor trusts with...
You cannot be charged just for the vesting of restricted stock, as no sale of securities occurs. However...
Whether you trade your company stock in your regular brokerage account or in...
Wrongly using information you learned on the job to buy stock in another company is still insider trading...
It applies to any confidential, important information that you reveal to anyone about your company...
When irregular trading activity is detected in a company's stock, all transactions made during the period under review are scrutinized...
Yes. A witness who lies under oath...
Brokerage firms must show client records after a request from the SEC and the exchanges in which the firms are members...
No. Unless someone who is part of a scheme confesses, as in the movie
Wall Street, direct proof rarely emerges...
Yes. Courts have the authority to bar you from corporate office or directorship if your conduct demonstrates...
Yes. Your intentions do not matter...
Under Section 21A(e) of the Securities Exchange Act, the SEC may award...
The SEC has reciprocal agreements with many countries...
The law is evolving on this question of "use" versus "possession" of information. The SEC adopted rules in late summer 2000, but they are untested...
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Insider Trading
