Insider trading represented on the screen
Share on Facebook
Share on Twitter
Share on LinkedIn

Insider trading is a serious offense with commensurately serious penalties – including sanctions, fines, and even imprisonment in a federal penitentiary. If you’ve been accused of insider trading, there’s no time to waste in securing the help of a federal white-collar crimes defense lawyer. They can review the allegations, advise you on your options, and devise a defense strategy to match the circumstances.

Understanding Insider Trading Charges

Insider trading occurs when a person buys or sells securities based on material, non-public information. This means the individual has access to confidential data about a company that could impact its stock price, giving them an unfair advantage in the market. Prosecutors frequently target corporate insiders, such as executives, employees, or others with privileged access to sensitive information.

The government aggressively investigates and prosecutes insider trading cases, seeking to maintain the integrity of financial markets. An individual convicted of federal insider trading charges faces:

  • Up to $5,000,000 in fines
  • Up to 20 years in prison
  • Disgorgement of up to three times the value of the profit gained or loss avoided

How Do Prosecutors Prove Insider Trading?

In order to secure a conviction for insider trading, prosecutors must show the following:

  • Existence of a Fiduciary Duty or Other Relationship of Trust and Confidence: The prosecution must show that the defendant had a fiduciary duty to the company whose stocks were traded or that they had a relationship of trust and confidence with the shareholders of the company. This duty can arise from being an officer, director, employee, or any individual who has received confidential information from someone with a fiduciary duty under the expectation that the information would be kept confidential and not used for personal gain.
  • Material, Nonpublic Information: The information on which the trading decision was based must be material, meaning it would likely influence an investor’s decision to buy or sell the stock. Additionally, the information must be nonpublic; that is, it wasn’t disclosed to the investing public. Information is considered nonpublic until it has been effectively communicated to the marketplace, such as through a press release or a filing with the Securities and Exchange Commission (SEC).
  • Breach of Duty: The defendant must have breached their duty by using the material, nonpublic information for securities trading, providing the information to someone else for personal benefit, or both. The breach occurs when the defendant exploits confidential information for personal gain or advantage, directly contravening the expected integrity of their position or relationship.
  • Knowledge or Recklessness: It must be proven that the defendant knew, or was reckless in not knowing, that the information they used was both material and nonpublic and that using this information for trading or tipping constituted a breach of their duty.
  • Benefit to the Insider: The prosecution must demonstrate that the insider received a direct or indirect personal benefit from the trade. This benefit must be significant enough to make insider trading attractive and can include not just financial gain but also gifts, favors, or promises of future benefits. 

Crafting a Comprehensive Defense Strategy 

The Federal Criminal Defense Attorneys of Michigan meticulously review all evidence when constructing a client’s insider trading defense. They scour the prosecution’s case for weaknesses and inconsistencies, developing targeted strategies to challenge the allegations. The firm’s attorneys analyze vital aspects of the case, including:

  • The source and nature of the alleged inside information
  • Whether the data meets the legal criteria of “material” and “non-public”
  • Evidence linking the client’s trades to the alleged inside information
  • Possible alternative explanations for the trades in question

By conducting a thorough investigation, The Federal Criminal Defense Attorneys of Michigan work to cast doubt on the prosecution’s narrative and explore all viable defenses. Because they stay current on all legislation regarding insider trading, they’re aware of the affirmative defenses to insider trading the SEC adopted in 2022. If they can take advantage of any of those in your circumstances, they will.

Contact The Federal Criminal Defense Attorneys of Michigan

Insider trading allegations demand serious attention and skilled legal representation. The Federal Criminal Defense Attorneys of Michigan offer clients facing these charges the experience, knowledge, and dedication needed to mount a strong defense. 

If you or someone you know faces insider trading allegations, contact The Federal Criminal Defense Attorneys of Michigan for a confidential consultation. Their team stands ready to provide the aggressive advocacy you need during this challenging time.