What are the legal restrictions imposed on insider trading?

Insider trading is when an individual with non-public information about a company uses that information to their advantage to make a financial gain. In Texas, like other states, there are legal restrictions that have been imposed on insider trading. The Texas Securities Act prohibits individuals from buying or selling stock based off of insider information. Specifically, the SEC (Securities and Exchange Commission) prohibits an individual from employing manipulative, deceptive or fraudulent practices in connection with the purchase or sale of any security. Additionally, the SEC’s Rule 10b-5 prevents an insider, or someone with private information, from trading on that information without disclosure of the facts to those trading on the open market. In Texas, this means that executives and other insiders of a company are not allowed to buy or sell the company’s stock without disclosing all material facts. Additionally, those working at the company must adhere to certain “blackout” periods during which trading is not allowed. This prevents executives and other insiders from taking advantage of any short-term gains. The Texas State Securities Board also requires people to register as “broker-dealers” if they plan to buy or sell securities to make a profit. This helps protect investors from illegal insider trading. Overall, the legal restrictions imposed on insider trading in Texas are designed to protect investors from buying or selling securities based on private information. By requiring disclosure of all material facts and adhering to certain blackout periods, these restrictions help promote fair trading in the stock market.

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What are the legal restrictions imposed on insider trading?

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