When someone obtains non-public information about a company and acts on it for personal gain, it’s considered insider trading. If you are facing an indictment on insider trading charges in New Jersey, it’s in your best interest to enlist the help of a determined Bergen County Criminal Defense Attorney who can help shield you from an uncertain future. Please continue reading to learn the penalties for insider trading in New Jersey.
What is Insider Trading?
Insider trading refers to the illegal buying or selling of a company’s stocks by individuals who have access to material, non-public information about the company. This information often significantly affects the value of the company’s securities. Under New Jersey law and federal guidelines, “material information” explicitly refers to any piece of data that could substantially impact an investor’s decision to buy or sell a security.
While some forms of insider transactions are perfectly legal, others can lead to serious criminal penalties. The complexities surrounding insider trading have made it a contentious issue in financial markets. Typically, anyone who has a duty to a company is considered an insider. As such, the Securities and Exchange Commission (SEC) explicitly defines an insider as an officer, director, stockholder with at least 10%, or any individual who possesses inside information as a result of their relationship with the entity, principle, executives, or stockholders. As such, those found guilty of this crime in New Jersey can face both civil and criminal charges.
The Compromise of Market Integrity
Stock market investing can always be a risky move, as you are never able to accurately predict what can cause the value of stock to increase or decrease. Because the stock market relies on traders making these decisions based on publicly available factors, like the financial standings of a company, public perception, or the launch of new products, when someone gains privileged information that has not yet been made publicly available to buy or sell ahead of the public discovering this information, it compromises the integrity of this process.
As a means of deterring these practices, New Jersey strictly enforces the NJ Securities Act of 1978, which prohibits fraudulent practices associated with the purchases and sales of these securities. At the federal level, the SEC and U.S. Department of Justice (DOJ) collaborate to investigate and enforce the regulations that prohibit the misuse of this confidential information.
What Are the Potential Penalties?
Generally, an insider trading indictment alleges that an individual has traded stocks or securities based on inside information or provided inside information to another individual who traded on that information. It’s important to note that these laws are also applicable to those outside of the business who act on insider tips that influence a company’s publicly traded stock price. That said, the penalties for insider trading can include:
- Fines: The maximum fine for securities fraud is $5 million, and the maximum fine for securities fraud conspiracy is $250,000. Under the Securities Exchange Act of 1934, corporations involved in criminal violations can face fines reaching up to $25 million per violation.
- Prison: The maximum penalty for securities fraud is 20 years of imprisonment for each individual violation, and the maximum penalty for securities fraud conspiracy is five years of imprisonment.
In addition to these penalties, a defendant may be required to disgorge profits made from insider trading and have to pay a civil penalty. In most regulatory enforcement actions, the SEC can impose civil trebled fines, which equal up to three times the total profit gained or the loss avoided as a direct result of the insider transaction. The defendant may also be banned from serving as an officer or director of a public company for some time.
What Are Common Defenses Against Insider Trading Charges?
If you have been accused of insider trading, it’s in your best interest to enlist the help of a skilled criminal defense attorney who can assess your case and formulate a robust defense strategy. Depending on the unique circumstances of your case, an attorney may be able to raise a company’s Rule 10b5-1 plan as an affirmative defense as long as the plan was written in good faith and meets rule requirements.
In addition, they may be able to assert a Mosaic theory defense, which establishes that a securities transaction was based on a variety of information obtained legally from multiple sources over time rather than from a single disclosure of insider information. Furthermore, they can raise a good faith reliance defense, which relies on a defendant having discussed a pending transaction with their attorney and then having executed it based on their attorney’s advice. This defense must demonstrate the defendant disclosed all relevant facts and circumstances about the planned transaction to the attorney, received legal advice, and then acted upon it.
Contact an Experienced Bergen County Criminal Defense Attorney
When faced with criminal charges for insider trading in New Jersey, it’s in your best interest to engage a seasoned criminal defense attorney from The Law Office of Carl Spector, who can help protect your rights in Hackensack, Paramus, and throughout Bergen County and fight for the best possible conclusion. Connect with our firm today to discuss your case.