Michael C. Hennenberg

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What is insider trading?

Many years ago, the biggest news was Martha Stewart's imprisonment for insider trading. It was a huge news story because she was a major celebrity and well-respected individual. At that time, many people were confused because they did not know what insider trading was. Sine it has been a while since this topic has been in the forefront of the news, you, too, may be wondering what it is. Because it is such a serious topic, everyone in Ohio should have some idea what it is and how they could be found guilty of it.

Insider trading, according to MarketWatch, is when someone shares or uses information gained from their knowledge of information not available to the public about the stocks of a company. That is a long definition, so it may help to break it down.

To begin with, if you were accused of insider trading, then it probably means you are an owner, high ranking officer, or employee of a business. However, you could also just be someone who has access to inside information, such as a spouse of a CEO.

To break the law, you would have to share information you gained as an insider with others who then act on that information before it becomes publicly known. For example, you are the CFO of a large company and you know that when the third quarter earnings report comes out, it will let the public know the company has suffered some losses during that quarter. You tell a friend who happens to own stock in the company. He sells his stock before the earnings release because of your information. You are guilty of insider trading. Do note that even if nobody acts on the information, sharing it is still insider trading.

Insider trading is an issue because it is unfair. It allows people to use their insider information to buy and sell stocks at an advantage over the public. This information is for education and is not legal advice.

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