Insider Trading and the SEC Whistleblower Program

Insider Trading and the SEC Whistleblower Program

Insider trading is an illegal practice in which a party trades a public company’s securities (stocks, bonds, stock options, etc.) based on material, nonpublic information about that company. Insider-trading laws aim to prevent this practice and protect market integrity. Detecting, preventing, and prosecuting insider-trading violations is one of the Security and Exchange Commission’s (“SEC”) top priorities. The SEC relies on information provided by whistleblowers to uncover and prosecute insider trading. The mechanism for reporting insider trading is the SEC Whistleblower Program. Under this program, whistleblowers who report insider trading are eligible for monetary awards. Below is an overview of insider trading and the SEC whistleblower program. 

What is Insider Trading?

A party commits an insider-trading violation when he or she purchases or sells a security in breach of a fiduciary duty (or other similar relationship) while in possession of material, nonpublic information about the security. In addition, an individual commits an insider-trading violation when he or she:

  • Trades securities based on information received from an insider, 
  • Provides someone with material, nonpublic information, or
  • Makes securities trades based on misappropriated information.

Examples of Insider Trading SEC Whistleblower Cases

The SEC issues reports on the types of insider trading cases it pursues. According to the SEC, it has brought insider-trading cases against: 

  • Corporate directors, officers, and employees who made securities trades after learning of material, confidential corporate developments;
  • Business associates, friends, family members, and others who received confidential information from corporate insiders;
  • Private and government employees who obtained inside information while providing services to the corporation whose securities they traded; and
  • Employees who misappropriated information from their employers.

Compensation for Reporting Insider Trading

If you have evidence that a party has engaged in insider trading, you may be eligible for a monetary award under the SEC Whistleblower Program. In order to qualify for compensation under the SEC Whistleblower Program, you must voluntarily provide original information about insider trading that leads to a successful SEC enforcement action with monetary sanctions that exceed $1 million. If your case is successful, you may be eligible to receive up to 30% of the monetary sanctions recovered. However, in order to give yourself the best chance at success in your SEC whistleblower case, you should contact an SEC whistleblower attorney for assistance. 

Contact Our SEC Whistleblower Attorney Today 

If you have information concerning insider trading or some other type of financial fraud, you may be entitled to a financial award. However, in order to ensure that you do everything correctly, you need an experienced SEC whistleblower attorney in your corner. At Newman & Shapiro, we understand how difficult it is to make the decision to become a whistleblower. Therefore, when we accept you as a client, we’ll do everything we can to ensure that you obtain the maximum award permitted by law. Please contact us today for a consultation.