2. Insider Trading Law Insider Trading Law: the trading of an organizations stocks/other securities by someone with insider information about the company. Securities: anything that represents financial value.
3. Insider Trading Law The Insider Trading Law doesn’t necessarily imply that trading by officers, key employers, directors, or large shareholders of the corporation is completely illegal. As long as these individuals aren’t using the insider information that they have to benefit themselves in regards to their trading.
4. Liability for Insider Trading Liability for insider trading cannot be passed off to another person who is not an insider of the company. For example: CEO of Company A did not trade based on his/her insider knowledge, but instead passed it off to his/her spouse who proceeded to trade on it. This is still considered illegal insider trading.
5. Who’s Liable? Some courts have indicated that a trader may be liable for trading while in knowing possession of insider information, while other courts have required a showing that the trader used the information in the decision to trade. The awareness standard reflects the SEC’s belief that a trader inevitably uses the insider information of which it is aware when making a decision to trade. The SEC’s rule is intended to clarify this standard without modifying any other aspect of insider trading case law.
6. Defenses for Insider Trading Before becoming aware of the information the trader entered into a binding contract, gave instructions to another person or adopted a written plan providing for the purchase or sale of the securities in good faith and not in an attempt to evade the new rules
7. SEC Requirements The SEC requires that if a company discloses information to a certain individual, it must also disclose that information to the entire public.
8. Securities Act of 1933 The securities act of 1933, also known as truth in securities law, has two basic requirements. that investors receive financial and other significant information concerning securities being offered for public sale prohibit deceit, misrepresentations, and other fraud in the sale of securities. The Securities Act of 1933 was the first major piece of federal legislation regarding the sale of securities.
9. Important Things to Remember… As a Communication Professional… Remember that if insider information is disclosed to an individual, make sure it is also released to the public at large. Remember that you can still trade your organizations stocks/other securities, as long as you are not using your insider information and trading based on that knowledge.
