What are my rights if I was accused of insider trading?

In general terms, illegal insider trading refers to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security.

The U.S. Securities and Exchange Commission (SEC) has brought insider trading cases against:

• Corporate officers, directors, and employees who bought or sold the corporation’s securities after learning of significant confidential corporate developments;

• Friends, business associates, family members, and others who bought or sold securities after receiving confidential “tips” from corporate officers, directors, and employees;

• Employees of companies (such as banks, brokerages, and printing companies) who bought or sold securities based on confidential information they learned about a corporation during their employment;

• Government employees who bought or sold securities based on confidential information they learned through their employment with the government; and

• Various others who have allegedly taken advantage of confidential information from their employers, family, friends, and others.

Who does the SEC target in an insider trading investigation?

The SEC views insider trading as both eroding public confidence in the market and impeding the fair functioning of the market. The SEC therefore aggressively prioritizes the investigation and prosecution of suspected insider trading, even when the activity involves relatively small dollar amounts.

The SEC generates leads on suspected insider trading in a number of ways, including through the use of sophisticated market surveillance activities and from tips and complaints from traders, whistleblowers, the financial media, and the public. Once the SEC identifies a potential instance of illegal insider trading, SEC investigators will seek to build a case by conducting personal interviews and examining email and phone activity, among other methods.

SEC investigators won’t limit their inquiry just to those who financially benefited from a suspected insider transaction. Instead, their investigation will likely seek to identify all involved and anyone with material information.