Insider trading cases show potential dangers for investors

March 21, 2013

Insider trading cases show potential dangers for investors

Article provided by Cogdell Law Firm, PLLC
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The stock market is demonstrating signs that the U.S. economy may be starting to recover from the most recent recession. Investors are more confident about the decisions being made by some companies and are returning to the market, leading to levels not seen since 2007.

The Securities and Exchange Commission (SEC) is the government agency responsible for regulating the stock market in the United States. The SEC will investigate stock purchases for signs of wrongdoing. These investigations are often very thorough, and can take some time before they are resolved.

One of the main concerns of the SEC is insider trading. The agency will perform extensive reviews to determine if any persons used inside information to make trades. Many of these cases get resolved before trial. However, two recent insider trading matters have received a significant amount of media attention due to the individuals connected to the deals.

Mark Cuban, owner of the Dallas Mavericks, was previously named in a civil suit by the SEC for a stock trade that occurred in 2004. The agency stated that Cuban sold his stock in a company before news was released that caused the company's stock to decrease substantially in value.

Cuban had contested the allegations, stating that he was free to sell the stock, and also that the agency was biased when it investigated him. The SEC watchdog reviewed his allegations, denying that the agency had any ill intent when it pursued the matter. Recently, a federal appeals court judge ordered that the SEC should be allowed to have a jury make a decision in the matter.

The second situation concerns the purchase of H.J. Heinz Co. by Berkshire Hathaway Inc., a group headed by Warren Buffet, and 3G Capital, a Brazilian firm. In this potential case, the SEC is focused on call options purchased the day before the deal was announced.

This resulted in a profit of $1.7 million for the unnamed investor. Accounts related to this investment have been frozen while the agency completes its investigation. No charges have currently been filed in this case at this time.

If you have been charged with insider trading or any other white collar crime, speak to an experienced criminal defense attorney about the options that may be available to you. These cases can have a significant impact upon a person's investments, and if convicted of a crime, can result in a federal prison sentence.

Agencies will often perform comprehensive investigations before bringing charges, so it is important to have someone on your side protecting your rights. An attorney can help you understand the nature of the charges against you, and can help you make the decisions that are best for your future.