Defenses to Insider Trading

 Posted on February 21, 2020 in White Collar Crime

Illionois defense attorney,  Illinois criminal defense lawyerIn early January, former Congressman Chris Collins was sentenced by a federal judge to over two years in prison for insider trading and making false statements to federal agents. The former congressman told his son that the results from the clinical trial conducted by Innate Immunotherapeutics were negative. Armed with the tip, Collins’ son sold his shares, and many others followed. Along with the jail time, the judge also sentenced him to a fine of $200,000.

Collins admitted to what he had done, saying that he was a disgrace to not only his son, but also the constituents he once served. However, not everyone charged with insider trading is guilty. For these individuals, there are many defenses available.

There Was No Purchase or Sale of Securities

Insider trading is the act of sharing information pertaining to securities before that information becomes public. Then someone must act on that information by either purchasing or selling their stocks or shares. In Collins’ case, the results of the clinical trial had not yet been released, but his son sold his shares after hearing of the trial’s results. This contributed to the conviction of Collins.

If there is no purchase or sale of securities, there is no insider trading. Intending to sell or purchase stocks or shares is not enough. There must be an actual transaction made.

The Information Was Public

Once information about certain securities has become public, anyone can act on that information. The company that has the shares or stocks also does not need to be the one to release that information in order for it to be considered public. The media could have leaked it, or a report could be published. As long as the public has access to it, that information is considered public and so, there is no penalty for sharing it.

The Information Was Immaterial

Even when information is not yet made public, the information must be considered material, or of high importance, in order for insider trading to occur. If the information is immaterial, it does not matter if it is shared or not, even if the information is not public.

In the case of the former lawmaker, the information was very important because it showed that their product was not as effective as the company had claimed. If however, the clinical trial was inconclusive, that would likely not be material because it does not reflect on the quality of the product and so, sharing that information would likely not be considered a crime.

Facing Federal Charges? Call Our Illinois Federal Criminal Defense Lawyer

Insider trading is a white-collar crime and so, many people think it does not carry harsh penalties. The case of the former congressman, however, shows that is not true. If you are facing charges of insider trading or any other federal offense, a skilled Chicago federal criminal defense lawyer can help with your case. At the Law Offices of Hal M. Garfinkel, we can help you build a solid defense to give you the best chance of beating the charges. Call us today at 312-629-0669 to schedule your free consultation.



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