Insider Trading

Many people associate the term 'insider trading" with illegal activity performed by people on the inside of a corporation such as corporate CEO's, company directors who sit on the board, corporate attorneys and others "in the know" who have confidential, significant information that can make the insiders a huge profit if a trade is made prior to certain things happening. These things can be either good or bad and a trade made to take advantage of the news.

But there is other entities that may take part in this illegal activity and these are the ones that are most difficult for the SEC to find and prosecute. These people could be friends, business associates, family members and company employees. Insiders, who know someone who knows some one.

Another group you might not even consider are banking, brokerage and printing firms who receive significant information about a corporation prior to the public learning about it.

And don't forget government employees who acquire information while doing their government jobs and end up trading on information that they have no right to do.

Trading performed by any of these people is illegal insider trading and sometimes very hard to prove. The Martha Stewart insider trading is a prime example.

She was classified as an insider, made certain trades because she had sensitive information about a company called Imclone. The head of Imclone told Ms. Stewart about certain things that were going to happen to the company. Stewart, began trading the Imclone stock in such a way that was contrary to how she normally would have done so. The SEC in an investigation of Imclone discovered the information, arrested Stewart and later prosecuted and convicted her.

The Imclone insider stock trading case is probably the most known case made public. It is well known as one of the most known cases of Insider trading the country has ever followed in the news and because of the ultimate conviction of Martha Stewart.

Martha Stewart and Peter Bacanovic were each sentenced to five months in prison, five months of home confinement, and two years probation for lying about a stock sale, conspiracy, and obstruction of justice. Stewart was ordered to pay a $30,000 fine.

The best known information the public has immediate access to is legal insider trading. The legal version of trading is when corporate insiders—officers, directors, and employees—buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC. That is insider trading policy

When this trading is reported to the SEC and then made public it allows the general public to use that information in a timely manner.

Insider trading the regulation of such trading by the Securities and Exchange Commission, SEC is what makes the trading of securities in the United States a very safe venture. The United States markets are a tremendous success because they enjoy the world's highest level of confidence.