The Atlanta Law Firm That Knows Business

Attorney George Koenig discussing his case in a courtroom.

Sharing business plans could lead to insider trader allegations

On Behalf of | Jul 28, 2024 | Business Law

Executives, shareholders and managers at businesses are often privy to non-public information. They know if the company is about to announce a merger or the acquisition of a competing business entity. They know about pending patents that could give the company in significant competitive advantage. They may even be aware of a company’s struggles, including the potential exit of key leadership or a potential bankruptcy on the horizon.

When there are big changes underway at a company, the people handling organizational transitions may have a lot of personal stress. They may need to work long hours and may have a hard time processing the situation. They may feel compelled to discuss their concerns with family members, friends or even social acquaintances at a lounge frequented by other business executives. Unfortunately, the details shared by organizational leadership could potentially result in insider trading allegations later.

Venting could lead to securities law violations

There are many laws regulating the financial conduct of individual investors and businesses. Securities law focuses on preventing the manipulation of the economy for personal benefit. Insider trading is one of many financial acts prohibited by current federal securities laws.

Most people in leadership positions at organizations recognize that they cannot buy or sell stock based on what they know about a company’s upcoming business plans. What they may not realize is that they could be culpable for the actions of other people as well.

Many insider trading charges relate to the financial conduct of individuals not directly employed by a business. When the friends, family members or social acquaintances of someone at an organization make highly-profitable trades prior to a major business announcement, that can lead to regulatory scrutiny.

If there is an indication that someone privy to non-public information shared that information with others, they might eventually face insider trading charges. The person with access to non-public information does not necessarily need to directly profit from that information to face criminal allegations.

Those who learn they are the subject of an investigation or who face arrest or indictment may need help responding to claims that they violated securities laws. Understanding that insider trading can relate to the financial conduct of other people can be beneficial for those privy to non-public information about a business.