Longer sentences recommended for insider trading

April 17, 2013

Longer sentences recommended for insider trading

Article provided by Law Offices of John D. Kirby, A P.C.
Visit us at http://www.johnkirbylaw.com

Insider trading is classified as a type of securities fraud. Because it is often hard to calculate the amount of money involved in an insider trading scheme, it is also difficult to determine the number of victims. This in turn makes sentencing difficult. However, white collar crime is on the rise and the severity of penalties for convictions reflects that trend. In 2011, an average sentence in a fraud case was 23 months. The average was only 14.4 months in 2003, reflecting an increase of 60 percent.

Being located in the financial epicenter of the United States, New York City courtrooms see a number of white collar crimes pass through their dockets. At the urging of the United States Sentencing Commission, and the full support of the Justice Department, judges in Manhattan's federal court have increased the sentences for individuals convicted of insider trading by some 20 percent over the sentences handed down for similar convictions between 2003 and 2010. These longer sentences for insider trading are in line with tougher sentences nationally for all forms of fraud. According to an article on Bloomberg.com, the average sentence for fraud convictions has risen from 14.4 months in 2003 to 23 months in 2011.

Details of the recommendation

Data from New York courts shows that judges there imposed average sentences of 22 months for those convicted of insider trading since 2011. This is a 20 percent increase from the past eight years. Additionally, 71 professionals from Wall Street were charged with insider trading since 2009, with 65 resulting in convictions.

Additionally, higher minimum penalties are now available to judges when sentencing defendants who intentionally used sophisticated methods to hide evidence of insider trading. Individuals convicted of insider trading are likely to receive a prison sentence, even if profits from the trading proved minimal. Supporters of the recommendation say this provision ensures that individuals can no longer escape harsh punishment simply because they failed to profit from their illegal actions.

Additionally, the increased penalties apply to a broader range of professionals. Longer prison sentences are now permissible for those who use positions of power to conceal evidence of insider trading. Those included in the new provision are:
-Hedge fund professionals
-Attorneys assisting with security transactions
-Other financial professionals

According to the Justice Department, opportunities to engage in insider trading are routinely presented to professionals. They claim the tougher sentences are necessary to prevent these opportunities from being acted upon.

Opposition to the recommendation

Opponents of the recommendation say there are no solid examples of judges unable to impose appropriate sentences because of soft sentencing guidelines. One defense attorney says allowing judges to lengthen sentences is likely to result in tough penalties for individuals only minimally involved in trading schemes.

Additionally, those involved in recent trading schemes already received severe sentences. One professional convicted of insider trading is serving 11 years in prison, while another is serving 10.

Judges already retain wide discretion when imposing sentences. Current federal guidelines allow judges a broad range of recommendations to use when considering sentencing. Because most judges already believe the recommended guidelines are too harsh, they usually impose lenient sentences, leaving opponents to further question the necessity of the new guidelines.

Defense for those who face fraud charges

A fraud charge carries serious consequences and risks professional reputation. An individual charged with a business fraud related crime can benefit from an experienced business fraud attorney. The attorney can provide knowledge and guidance and develop a solid defense.