What is insider trading?
Insider trading is an illegal practice in which a person with insider information makes a financial decision based on that information. Insider information is non-public information about a company’s funds, financial condition, or businesses decisions. In Securities Fraud Law in California, insider trading is illegal and punishable by law. For example, if a person has knowledge that the stock price of a particular company is about to drop, they are not allowed to use that information to purchase stocks in the company at a low price. Similarly, they cannot instruct someone else to do this on their behalf. This is considered to be insider trading because it gives the person an unfair advantage over other investors. Insider trading is also illegal if a person with confidential information passes that information on to someone else who then uses it to make money. This is known as ‘tipping off’ and is also illegal. It is important for investors to remember that it is illegal to buy or sell stocks based on inside information. Individuals who are found guilty of insider trading can face jail time, hefty fines and be forced to give back any profits made from this activity. It is important to be aware of the laws surrounding securities fraud and insider trading in California, as breaking these laws can have serious consequences.
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