The Securities Exchange Act of 1934, found in Title 15 of the U.S. Code at Section 78a established the Securities and Exchange Commission and formed the basis of regulating American financial markets. This is commonly referred to as the Exchange Act or the ‘34 Act.

The Securities and Exchange Commission (SEC), in addition to Securities Commissions in each of the nation’s 50 states, enforces securities regulations. The SEC may recommend that the Department of Justice pursue criminal prosecution of a claim and the SEC may bring suit against inside traders to seek a court order prohibiting further trading under threat of fines and imprisonment.

Insider trading violations may include “tipping” non-public information to people outside the corporation, securities trading by the person “tipped,” and securities trading by those who misappropriate such information.

Proving that someone has been responsible for a trade can be difficult because traders may try to hide behind nominees, offshore companies, and other proxies. Nevertheless, the SEC prosecutes over 50 cases each year, with many being settled administratively out of court.

At the request of the SEC, the court may order an inside trader to pay a civil penalty of up to three times the profit gained (or loss avoided) as a result of insider trading.

If you are under investigation for insider trading, consult with a criminal defense attorney right away. An experienced criminal defense lawyer will help protect your rights and represent you in any dealings with the SEC and/or the Department of Justice.