What are the legal restrictions on insider trading?
Insider trading is the practice of buying or selling corporate securities while in possession of confidential information not available to the general public, in violation of a duty of loyalty or trust to the company. In North Carolina, this practice is strictly prohibited by federal law. Under Section 16 of the Securities Exchange Act of 1934, directors, officers, and major shareholders of a company are prohibited from buying or selling their own company’s securities without first disclosing the material information they possess. This requirement also applies to employees of the company who possess material, nonpublic information about the company. The Insider Trading Sanctions Act of 1984 modified the 1934 act, making it a civil offense to engage in insider trading. A person found guilty of insider trading is subject to a fine of up to three times their ill-gotten gains, as well as disqualification from participating in certain activities related to the securities industry. Insider trading is also forbidden under North Carolina state laws. The state’s statutes make it a criminal offense to trade any security while in possession of material, nonpublic information. Penalties for violating this law include fines and imprisonment. In summary, North Carolina has strict laws in place to protect against insider trading. It is a federal offense punishable by fines, while it is a criminal offense punishable by imprisonment under North Carolina state laws. It is important for investors and traders to understand the legal restrictions on insider trading to comply with the law and protect their investments.
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