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Many people speak about how their company has ethical practices; however, saying that you adhere to a certain code and doing it are two different things. One thing that all companies have to be especially careful about is how people who have inside knowledge about the company’s fortunes
It’s illegal for a person who has intimate knowledge of a company to use that “inside information” to use that information to make investment decisions — nor can they share it with their friends and relatives. Only information that’s relayed to shareholders or the general public should be used to make those decisions.
Investors and shareholders must have equal, accurate and complete information on which to base their decisions. “Insider trading,” which is the use of hidden information to make investment decisions, violates that principle.
When confidential information is used to make decisions about buying or selling stocks, the person who shared that information may be charged with insider trading. Plus, those who know what was shared can also be caught up in criminal charges, whether they participated in the insider trading scheme or merely tried to hide what they know about it from investigators. This is the felony that Martha Stewart faced years ago.
Anyone who’s facing an investigation related to insider trading should ensure they have experienced legal representation from the very start. When these charges are filed in federal court, the government has significant resources at its disposal. The best way to counter those resources is to have your own — and a good strategy in place surrounding your defense.