Securities Fraud Defense Lawyer in Naples
Collier County, Florida insider trading attorneys ready to fight for you
The U.S. Securities and Exchange Commission takes enforcement actions against people and entities believed to have engaged in insider trading. This form of fraud arises from acting on nonpublic information when making the decision to buy or sell stock for the purpose accessing gains or avoiding losses. Federal law views this as unfair because the investing public did not have access to the same information when making trading decisions. Individuals, business partners, corporate officers and companies in Naples, Florida, could be the subject of federal prosecution if their actions are perceived as unlawful. People accused of this crime should speak with a Naples insider trading defense lawyer before responding to allegations due to the fines and possible prison sentences associated with insider trading convictions.
Types of insider trading
Most people understand insider trading to be company insiders buying stock before outsiders learn about new information favorable to the company or selling it because of undisclosed negative news. A second type of potentially illegal activity is misappropriation of information. This happens when people are not company insiders but have access to confidential company information. Lawyers and accountants making trades based on information that they know to be confidential could be subject to prosecution.
Outside of confidential service providers, any people may be exposed to tippee liability if they make trades based on information from people who are breaching their fiduciary duty.
SEC surveillance of securities trading
Insider trading scandals occasionally appear in national headlines, but almost anyone, including individual retail stock investors, could become the target of a SEC investigation. The agency routinely takes action against private citizens after detecting suspicious activity through:
- alerts provided by the Financial Industry Regulatory Agency
- trading data studies performed by the SEC’s Analysis and Detection Center within its Market Abuse Unit
- tips and complaints provided by other investors
When the regulatory agency’s surveillance activities flag transactions as suspicious, it could initiate a civil or criminal investigation. Unusually profitable trades, especially those that take place before events influential to the company, could trigger closer scrutiny by investigators.
The SEC may take notice when trades occur prior to:
- an announcement of a merger or acquisition
- publication of significant corporate news
- issuance of earnings reports
Do not say anything that might incriminate you. Speak with an attorney first.
Who are ‘insiders?’
- officers and directors of publicly traded corporations
- owners of more than 10% of a company’s stock
- friends and family of company insiders
- employees of service companies, like law firms or banks, who see nonpublic information
- government employees who encounter insider information about companies
- any person acting on inside information not available to the public
When corporate officers and employees make trades based on private information, they are considered to have failed to fulfill their fiduciary duty to shareholders. However, employees trading their employer’s stock can do so legally when they report their intentions to the SEC in accordance with regulatory requirements.
Burden of proof for insider trading
Although many nuances influence each case, federal prosecutors need to prove three essential elements to secure a conviction for insider trading. These standard legal elements are:
- The stock transaction in question actually occurred.
- The defendant possessed nonpublic information.
- The nonpublic information was “material.”
The concept of material has been open to interpretation because it lacks a specific legal definition. In general, the federal government considers it to be information significant enough to motivate an investor’s trading decision. Many issues relevant to a company’s stock performance could be significant, including:
- Upcoming share splits or buybacks
- New business opportunities
- Lost business contracts
- Acquisition or divestiture
- Unexpected financial reports
- Insider trading defenses
The fact that a certain person or entity made a specific trade is rarely open to discussion. The transaction was recorded and is a matter of fact. Beyond that, however, accusations of insider trading against someone in the Naples area are largely a matter of circumstantial evidence. It can be difficult to prove that someone actually had information unavailable to the public and that it motivated the transaction.
An insider trading defense attorney may challenge the assertion that the information was material. The information or tip may not hold enough importance for a “reasonable investor” to act upon when buying or selling stock.
The status of information as “nonpublic” may also be unclear. It may have been available due to a media leak, buried within a previously published report from a company or discussed openly at a public event.
In some cases, people had previously entered into contracts to buy or sell a security on a certain date or when it reached a certain price. Such contractual documentation may enable an affirmative defense that argues that the person made the trading decision prior to hearing any inside information.
Criminally prosecuted insider trading cases could send people to prison for up to 20 years upon conviction. Criminal fines can reach as high as $5 million. Civil cases could result in defendants paying significant financial settlements.
Legal help in Naples
Prosecution for insider trading is not something that only happens to very wealthy business elites or celebrities. Almost anyone engaged in stock trading could become embroiled in a SEC investigation if something appears suspicious. People might act upon information without knowing that it was nonpublic and suddenly have federal investigators asking questions. Legal advice before making statements to regulators is crucial for understanding rights and preparing a defense strategy. Confidential guidance from a lawyer with extensive knowledge of federal criminal defense is available at Joffe Law, P.A.