What are the legal restrictions imposed on insider trading?

In California, insider trading is illegal, meaning it is a crime for someone to buy or sell stocks, bonds, or other securities using information that is not available to the public. The U.S. Securities and Exchange Commission (SEC) has imposed regulations to regulate and police insider trading activity. First, the basic rule for insider trading is that corporate insiders (like officers, directors, and large shareholders) cannot buy or sell their company’s securities while in possession of material, non-public information. The SEC also enforces a rule specifically prohibiting tipping, which is the sharing of non-public, material information with someone else who trades on that information. In addition, California law prohibits the corporate insiders from purchasing or selling their own securities while they have knowledge of certain material information, such as reports or financial statements that are not yet public. Furthermore, they may not buy or sell a security while actively participating in deciding whether to make public information that would affect the market value of the security. Finally, public companies are required to disclose all material information that would impact the company’s stock price, so if the company fails to do so, then the general public may have the same access to information that insiders do and can be found guilty of insider trading. Therefore, any person participating in the trading of securities in California should be aware of the legal restrictions imposed on insider trading.

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What are the legal restrictions imposed on insider trading?

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