Insider trading has a negative impact on all investors

Insider trading happens when a person makes a trade based on information that is not available to the public. Trading can be based on an event that is likely to either increase or decrease the price of a company’s stock. For example, a better than expected quarterly performance would likely make stock options more valuable. Trading on this type of information before it’s made public provides investors and brokers with an unfair advantage. That’s why it’s important to take steps to level the playing field.

The rewards are small for a big risk

People who engage in insider trading often suffer from a type of tunnel vision. When a broker makes trades in the hundreds of millions of dollars per year, an insider trade involving a few thousand dollars doesn’t seem like a big deal. Years ago, lifestyle guru Martha Stewart was convicted of insider trading. The illegal trading amounted to $45,000. Peanuts for someone with a net worth in the millions. Nonetheless, she still had to pay significant fines and serve a prison term.

Holding parties accountable

It doesn’t matter whether insider trading involves pennies or jaw-dropping amounts of money. It’s against the law and hurts investors who operate above board. The Securities and Exchange Commission (SEC) tends to focus on high profile cases. While insider trading can hurt the bottom line of large companies, it’s often individual investors who place their trust in a broker who suffer the greatest amount of harm.

You don’t have to wait for the SEC to act if you’ve experienced a significant financial loss as the result of insider trading. A skilled professional with experience handling matters involving broker misconduct and securities litigation can help you explore your legal options.

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