How do insider trading laws protect investors from securities fraud?
Insider trading laws protect investors from securities fraud by providing them with legal recourse. These laws prohibit corporate insiders and other people who have access to non-public information about a company from engaging in transactions related to that company’s securities. Buying or selling stocks, bonds, or other securities based on insider information provides an unfair advantage to the trader and could lead to fraudulent practices. Basically, the insider trading laws prevent insiders from taking advantage of their privileged access to company information and profiting from it. It also creates an even playing field for all investors, since everyone is subject to the same laws and regulations when trading securities. If someone is caught trading securities based on insider information, they face penalties such as fines, jail time, or suspension of trading privileges. In California, the laws against insider trading are set out in the California Corporations Code sections 25400 to 25404, which provide detailed rules and regulations on when a person can trade securities. These laws help protect investors from fraudulent activities by prohibiting insider trading and creating a level playing field for everyone trading securities in the state.
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