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Lesson 16. Frequently Asked Questions > Insider Trading - Pg. 81

Frequently Asked Questions 81 This is one of the most common civil and criminal violations in the securities business. Government officials look for unusual trading patterns right before or after a significant event in an attempt to catch people trading on inside information. One of the basic precepts of the stock market is that every investor has access to the same infor- mation at the same time. How investors interpret the information is their business, but no one should have an unfair advantage because he has access to news that is not available to the public. Caution Insider trading can land you in jail. Even the smallest cases receive the close attention of government investigators. Question: Does the insider trading rule cover me after I leave the company? Answer: Yes, the rule covers you for however long you possess material information that is not available to the public. Leaving the company does not get you off the hook. It is also not a good idea to trade on the information as soon as it becomes public. For example, the information released at 9:30 A.M. followed by your trade at 9:31 A.M. would be suspect. Check with legal counsel for advice on timing of your trades. The Securities and Exchange Commission (SEC) takes insider-trading charges very seriously. You don't want even the appearance of impropriety when it comes to securities laws. Question: The legal counsel at our company warned us (executives) against "short-swing profits." How can I avoid this liability? Answer: The short-swing profit rules match trades within a six-month period forward and backward. For example, if you buy your company stock for $75 per share in April and sell it at $90 per share in July, you have made a short-swing profit.