Federal Insider Trading in South Florida

We understand being charged with or even being investigated for federal insider trading in South Florida can feel overwhelming. You may be wondering about your next steps, wondering what your best course of action is. First thing you should do is become acquainted with the meaning of illegal “insider trading,” and what the penalties for this federal offense are. Luckily, you’re in the right place. Our white collar defense attorneys are here to help.

What is a Federal Insider Trading Crime?

Insider trading is a federal crime punishable according to various federal statutes with provisions which either specifically forbid insider trading or have been interpreted by courts to prohibit insider trading.

Insider trading is when a person who uses information about a stock not readily available to the public ⎯ which they gained as a company insider or from a person who works as an insider of the company ⎯ trades a public company’s securities and makes a profit or avoids a loss.

According to federal law, an “insider” is defined as a company’s officers, directors, or anyone who is in control of at least 10% of a company’s equity securities, which includes shares of both common and preferred stock.

It is important to note that insider trading in South Florida can be either legal or illegal, depending on when an “insider” makes a trade.

Insider trading is illegal when the material information used by an insider, for a trade, is still non-public or has not been disclosed to the Securities and Exchange Commission (SEC).

There are quite a few federal statutes which directly forbid federal trading or have been interpreted to do so. These include:

• The Securities Act of 1934:
  • This federal law regulates the secondary trading of securities (stocks and bonds).
  • The secondary market is the market of securities after they have been issued, which often include investors buying and selling securities they already own.
  • This act includes a provision that is designed to discourage insiders in a corporation from taking advantage of inside information in the trading of the corporation’s securities.
• The Insider Trading Sanctions of 1984:
  • This act provides that, if the SEC believes that any person has bought or sold a security using material nonpublic information, the commission may bring an action in U.S. district court to seek a civil penalty.
  • The penalty may be up to three times the profit gained or loss avoided.
• The Insider Trading and Securities Fraud Enforcement Act of 1988:
  • This act expands the scope of civil penalties to control persons who fail to take steps to prevent insider trading.
• The Stop Trading on Congressional Knowledge (STOCK) Act of 2012:
  • This act makes it clear that Congress members, congressional staff, and other federal officials may not use nonpublic information, available to them due to their position, to make a private profit ⎯ by means of insider trading.
  • This act also makes it clear that Executive branch employees, judicial officers, and judicial employees are not exempt from the insider trading prohibitions.

Section 10(b)4 of the 1934 Act and SEC Rule 10b-5 are used in most cases of insider trading violations. Section 10(b)4 of the 1934 Act is a general antifraud provision.

SEC Rule 10b-5  (17 C.F.R.§240.10b-5) focuses on insider trading and is the general SEC rule which is used in all kinds of securities fraud cases.

It states:

• “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange:
  • To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”

CONSEQUENCES OF FEDERAL INSIDER TRADING

Federal charges are serious for anyone being investigated for or charged with illegal insider trading in Fort Lauderdale or elsewhere in the state.

In such cases of insider trading, federal prosecutors must prove that the person charged is guilty without a reasonable doubt. In order to do this, they must prove that:

1. A sale or a purchase of security (such as a stock or a bond) was made,
2. The trade occurred while the defendant was “in possession of” nonpublic information,
3. That information was “material” (that it would be information that would be relevant to investors when deciding whether to buy or sell), and
4. The information was not yet made publicly available.

Insider trading can be punished by civil sanctions, or involve civil prosecution, or both.

Under federal law, if the SEC brings a civil action against you for violating insider trading rules, civil penalties of up to three times the profits gained or losses avoided from a trade ⎯ as is provided for in the Insider Trading sanction Act of 1984 and the Insider Trading and Securities Exchange Act of 1988.

It is important to know that an individual facing such charges may have to forfeit or disgorge any gains from the illegal trading. Additionally, they may face charges for violations that may include: wire fraud, securities fraud, obstruction of justice, and tax evasion.

If you are convicted in a criminal insider trading prosecution, you are subject to:

• Fines up to $5 million as an individual
• Fines up to $25 million as a business entity
• Up to 20 years  in federal prison
• Possible to face both fine and prison penalties

FEDERAL INSIDER TRADING ATTORNEY IN SOUTH FLORIDA

Illegal insider trading is serious, therefore you believe you are being investigated or have been charged with this, it is important to reach out to a criminal defense lawyer.

Though the SEC actively monitors trading and looks for suspicious activity, proof of insider trading can be difficult and various defense strategies to contest these charges.

At Rossen Law Firm, you can rest assured that you are in great hands. Not only do our lawyers have ample experience in defending cases related to insider trading, but we work tirelessly for our clients. Below are some of the few strategies we may use to defend clients facing illegal insider trading charges.

Federal Insider Trading Defense Strategies in South Florida

• There are various defenses that experienced attorneys may use to defend your case. These may include debating whether:

1. You engaged in a legal inside trade/ the trade involved a security;
2. The information you relied on was material or not;
3. The information you relied on was publicly known;
4. Your intent was culpable or not; and
5. You had no knowledge of an illegal trade.

• Other defenses may include questioning whether the nonpublic material information was relevant to the trade, in which case it would have to be proved that this information was not the reasons for the trade ⎯ that the trade would have occurred regardless.
• Mosaic Theory: This may include stating that a person charged obtained information in bits and pieces and that they came to their decision using their own reasoning.
• Good faith reliance: You may also argue that the trade was in fact legal, and that the person charged did so using the advice of counsel and that that advice used the disclosure of all relevant facts.

Set Up Your Free Federal Insider Trading Defense Strategy Session at our Fort Lauderdale Office

We handle charges for Federal Insider Trading in South Florida. We know how to protect your rights and provide you with a personalized and aggressive defense to your federal charges. Give us a call to learn how we can fight for your rights and your future.

We offer FREE strategy sessions so you know how we’ll work to get the best possible result on your case for you.

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