Illegal insider trading schemes make the news so frequently that the term “insider” has come to connote an action that is necessarily unscrupulous. However, company employees often engage in insider trading that falls within the scope of the law, and is not unethical, assuming matters are conducted above board. Your Boston business lawyer can help ensure that your trades and other business matters do not violate Securities and Exchange Commission conditions.
Trading within the Company
Employees and officers of publically traded corporations often own company stock. They may conduct exchanges of stock within a company, and as a matter of fact they often do so. Prior to a recent ruling (SEC 10b5-1) individuals would usually engage in such trades within a short time after corporate information was released to the public, such as in annual reports. This was to ensure that there were no allegations of using non-public information in the trade.
The SEC ruling clarified matters sufficiently, however, and stipulated that merely the possession of such information is a violation. The SEC would assume that the mere possession of the information suggests that it was used in the trade.
The ruling also provided for situations in which insider trading is acceptable. For instance, an employee who plans to retire may develop a contract allowing him to sell a certain percentage of his stock on a monthly basis. A Boston business lawyer can assist in developing such a contract.
In essence, employees who trade stocks within the company can do so legally provided they do not rely on nonpublic information which may place them at undue advantage. Any such exchanges must be reported to the SEC.
Call for Assistance
For legal advice and/or assistance on business matters, call Boston business lawyer David Ionson for a consultation at (781) 674-2562.