Insider Trading

INSIDER TRADING

INTRODUCTION
 The term insider trading is defined as the buying and selling of the publicly traded shares of the
company by the person who has the knowledge of some of the nonpublic related information.
This term is considered as the illegal activity if done for the personal profits.
 This is considered as illegal activity if it is used by the person for any material information that is
still not public and can impact the shareholders decision making process (Agrawal & Cooper,
2015).

LEGAL IMPLICATION INSIDER TRADING
 The term insider trading is considered as illegal when the buying and selling of the security has
been done in case of breach of fiduciary duty or the director or the person has breached the
relationship of trust that has occurred between the shareholders (Ahern, 2017). The penalties that
are sanctioned by SEC are defined on two basis which includes criminal penalties and the civil
penalties. These are described as:
 Criminal penalties: The prison sentence of maximum 20 year. Criminal fine of $5,000,000 and
maximum fine of $25,000,000.
 Civil penalty: The person would be forced to disgorge the profits that he had gained and would be
liable to penalty for three time the profit earned by the person.