Insider Stock Tips and Their Role on General Trade

Posted by Deb | Guest Post | Friday 15 June 2012 12:35 am

Insider trading is a term that includes both illegal and legal stock trading conduct. Legal stock trading happens when corporate personnel like directors, officers, and employees sell and buy stock in the companies that they work. All trades done by corporate insiders, in their own companies, must be reported to the SEC (Securities and Exchange Commission). On the other hand, illegal insider trading deals with the selling or buying of securities that breaches the relationship of confidence and trust while in possession of non public and specific information about own companies stocks. Violations for insider trading include tips used by employees themselves or by anyone else that misappropriates this information for trades. Since illegal insider stock tips affect general trades by diminishing the overall investors’ trust in the integrity and fairness of the U.S. security market, the U.S SEC prioritizes the prosecution and detection of illegal insider trades.

Civil Enforcement of Trades

The U.S. SEC’s civil enforcement against illegal inside trading is a very powerful tool. The U.S SEC has ample authority to research violations of security regulations, including insider trades. Informal investigations, done under Commission authorization, usually request information on trades to be provided voluntarily. However, formal investigations have subpoena power for witnesses to give records, books, and related evidence or even testify.

Illegal Insider Trades

The SEC has brought cases against the following types of insider trades:

  1. Corporate employees, directors, and officers who traded corporate stocks after confidential and significant information was known.
  2. Any person who received tips by such corporate employees that traded stocks with the confidential information given.
  3. Employees of brokerage, banking, and law institutions who obtained confidential information by providing corporate services in order to personally trade stocks based on such information.
  4. Government workers that trade stocks based on confidential information learned through their government position.
  5. Any other person that takes misappropriates and advantages of confidential information from an employer to perform security trades.

Legal Insider Trades

Legal insider trades are done on a daily basis by corporate insiders like employees, directors, and officers by selling and buying stocks from their own businesses within the limits of company regulations and policies that rule this type of trading. Insider stock tips that result in trades must follow SEC’s regulations. SEC imposes limits on how insider trades can be performed based on pre-existing contracts and the specific information material of these insider tips.

Fairness

One of the main reasons for capital to be available in high quantities in the U.S. security market is achieved from the investors’ confidence of the market’s fairness. Fairness is a critical factor on stock market trading which rules all insider trading. For example, there is a common belief in Europe that only some investors can constantly profit from having access to confidential material. This belief has caused Europeans to hold less stock on average in their respective markets in comparison to the more active U.S market. This is one of the reasons for the U.S. SEC to actively enforce insider trading to boost investors confidence in a security market as equal as possible.

Insider trading policies take into consideration the importance of attracting both national and international investment capital in the U.S market by increasing investors’ confidence. Many laws have been created to limit how insider trades are done since investors should have equal opportunities to profit from the market. These laws are meant to provide a security market where individuals can invest without the need to possess confidential corporate information.

This article is provided courtesy of Auto Loan Experts, a consumer finance website providing information and tools on auto loans for bad credit and other personal credit services.

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When Will I be Back to Trading?

Posted by Deb | Day Trading Journey | Friday 8 June 2012 2:52 pm

I got a few inquires from readers of this blog wanting to know if I am back to trading yet. Well, first, thanks for asking. And no, I am not yet back to futures trading. I do intend to get back to this, probably in a few months.

After I lost most of my capital, I decided to wait till I will feel less anxious about trading. Last time, I felt I was somehow causing this failing myself. I got to a stage where I had a wonderful month, making more and more profit, and then – boom! I failed and lost everything. I feel there was something psychological about it, not being ready for this.

I hope to be back to trading and blogging again about my trading experience in a few months. When I feel ready.

Meantime, I am trying some other “making money online” schemes. I will write about this soon.

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