View More

What Is Insider Trading?

The U.S. Securities and Exchange Commission (SEC) defines insider trading as: “Buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, based on material, nonpublic information about the security.” In other words, you cannot use confidential or nonpublic information for profit when you are an officer, director, or someone with at least ten percent of stock shares in a company. This prevents an individual or a corporation from manipulating stock value and potentially triggering a massive market collapse.

Constructive Insider

You may also be charged with insider trading if you are considered a “constructive insider.” A constructive insider might be a reporter, stockbroker, employee, or anyone who purposely or inadvertently learns this information and uses it for financial gain.

Penalties for Insider Trading

The SEC can’t arrest you, but the U.S. Justice Department and local United States attorneys’ offices can convict you on federal insider trading charges. The Securities Exchange Act of 1934 provides the following sentencing guidelines for investment securities fraud:
  • Maximum prison sentence up to 20 years
  • Individual fines of up to $5 million for each willful violation
  • Corporate fines of up to $25 million

Civil Charges

You may also face civil charges that prohibit you from serving as an officer or director of a public company. An insider trading conviction increases your risk of being sued by shareholders. Your life may never be the same if you are convicted on federal insider trading charges.

N.Y. State’s Insider Trading Law

The Martin Act of 1921 gives the New York Attorney General (AG) extraordinary leeway without the same burden of proof as federal prosecutors. Considered the most rigid securities fraud law in the country, the A.G. can use the Martin Act to investigate, subpoena, arrest, and charge on nothing more than a suspicion of false promises or alleged fraudulent behavior. The AG does not have to prove intent to defraud or proof of a fraudulent sale or transaction. Their actions are not subject to judicial review. Many people have been arrested and convicted on nothing more than the A.G. suspecting false promises without evidence of a single fraudulent transaction.

Power to Investigate Securities and Real Estate Offerings

The AG has the authority to launch a public or confidential investigation into:
  • Any sale, offer, or purchase of securities and commodities within or from New York
  • Any sale, offer, or purchase of real estate involving condominiums and cooperative apartments within or from New York
The State may:
  • Commence civil proceedings for restitution or injunctive relief
  • Issue statewide subpoenas to secure documentation and testimony
  • Grant witness immunity
You don’t have to be convicted to suffer a tremendous loss of personal, professional, and financial capital. That is why individuals facing insider trading charges in New York are best represented by a New York lawyer with a deep understanding of federal and state law.

N.Y. State Penalties for Insider Trading

Under the Martin Act, the A.G. may seek misdemeanor and felony charges:
  • Fines of $3,000 for each injunction violation – civil misdemeanor
  • Fine up to $500 and one year in prison for criminal misdemeanor
  • Imprisonment of up to four years for felony criminal charges

Felony Convictions

A former felon carries the stigma of this conviction forever unless their record can be expunged. A felony conviction takes away your right to vote, serve on a jury, or run for public office.

How We Defend and Protect Your Rights

Your legal defense begins with a thorough evaluation of the charges against you. We may be able to negotiate a successful resolution without ever stepping foot in a courtroom. However, we are prepared for trial with an exhaustive defense strategy that includes:
  • Applied knowledge of state and federal securities laws
  • Counter-evidence, testimony, and documentation to the prosecution
  • Exceptional courtroom acumen from voir dire to closing arguments
Protass Law PLLC is ready to defend you against SEC and Martin Act charges.

A NYC Attorney Who Knows NY Laws

The federal government is only one threat to your life and liberty if you are suspected of insider trading. The New York Attorney General has far-reaching powers that can destroy everything you have worked diligently to preserve for yourself and your loved ones. Our New York City law firm has more than two decades of law practice focusing on white-collar defense. Protass Law PLLC has helped many clients avoid prison, fines, and public embarrassment from insider trading charges. We are skilled negotiators and aggressive trial lawyers. Our only goal is securing your freedom from severe state and federal prosecution.

Defense Strategy

Each case is different, so we implement a defense strategy accordingly. These strategies might include:
  • Lack of intent
  • Insufficient proof of insider trading
  • Preplanned trade independent of any insider knowledge
  • Beyond statute of limitations for state and federal charges

Who Can Be Convicted of Insider Training?

Everyone is vulnerable to penalties for insider trading, including celebrities and elected officials. What do Phil Mickelson, Steven Cohen, and Chris Collins have in common? They all faced criminal or civil charges for insider trading.

Phil Mickelson

Professional Golfer Mickelson was ordered to settle a civil case by agreeing to give up his trading profits of over $931,000 plus $105,000 interest.

Steven Cohen

Financial Executive Cohen pled guilty and paid a fine of more than $1.8 billion.

Chris Collins

Former House Representative (R-NY) Collins was arrested for insider trading on biotech stocks, which carries a potential maximum prison sentence of 20 years, $5 million in fines, and a maximum fine for corporations of $25 million.

What Else Do These Defendants Have in Common?

They didn’t call investment fraud defense attorney Harlan Protass. While we cannot guarantee the outcome of a case, our track record speaks for itself. We understand the complexities of insider trading charges. Our team prepares a customized defense designed to lessen the impact of criminal and civil charges or have these charges reduced or dropped before trial.

Call Now for a Free, Confidential Consultation

You may be facing a criminal investigation, arrest, or court appearance for insider trading and similar investment or security fraud. You deserve a strong legal advocate who fights for your professional, personal, and financial freedom. Call Protass Law PLLC today at 212-455-0335 for your free, confidential consultation.