Delving into the stock market is often hard for first-timers. There are plenty of unspoken rules that can trip people up. On top of that, you have actual litigation that dictates how the market works, too.
Before diving into trading, you should understand what is and is not legal. For example, participating in illegal insider training can net you hefty penalties.
Forms of insider trading
The U.S. Securities and Exchange Commission lists what you need to know about insider trading. This happens when you use privileged information to make trading decisions. The general public does not have access to the same information you do. Thus, you have an unfair advantage.
Insider trading comes in many forms. For example, an employee in a company may get news that the company will soon file for bankruptcy. They use this information to sell all their stocks before the value can tank in the market. You can even get in trouble for taking the advice of “tippees”, who spread information about securities that they get from their jobs.
The stock market does not tolerate this sort of behavior. After all, it undermines investor confidence in the securities markets. They may question the fairness and integrity of how the market works if insider trading is not treated harshly.
Penalties if convicted
Thus, you face massive penalties if convicted of insider trading. You may face a jail sentence of up to 20 years. You can also face a fine that maxes out at $5 million for individuals. Businesses and groups can face an even steeper fine.
If you find yourself up against charges of insider trading, consider contacting a legal expert. They can help you defend yourself against the allegations and their accompanying penalties.