So, you are an insider. Maybe you work for a publicly traded company, or you know someone who has access to confidential business information. No matter what position you are in, it is important to understand how insider trading laws might apply to you when you trade company stock.
Insider trading refers to the buying or selling of securities by people who have access to non-public information that could affect the stock price. One of the scariest aspects of insider trading is that it could lead you to commit a serious crime without even realizing it.
Because insider trading is legal in certain contexts, it is easy to become confused about what you can and cannot do. Trading your company’s shares is permissible as long as you follow the Security Exchange Commission’s guidelines, such as reporting your trades. However, if you miss a step in this process when you trade, you might be committing illegal insider trading.
You must also be careful with non-public information that you come across. For example, you might overhear a conversation about a merger that your company is a part of. Perhaps your company plans to announce the merger to the public within the next week. You then might mention the information offhand when you are chatting with a friend. If your friend buys or sells stock because of this, you have tipped confidential information, which is also an insider trading violation.
Given the consequences of misusing insider knowledge, it is important to watch what you say and do. The right diligence can help you avoid professional and legal trouble.