2 Securities Brokers in Bay Area Arrested for Insider Trading (18 United States Code 1348)

Rabin Nabizadeh
June 16, 2014

$12 million is the figure that law enforcement officials have released as the amount of monies that have possibly been taken by 2 Bay area brokers in an alleged insider trading scheme involving Ross Stores.  Supposedly one man (name withheld in order to protect the privacy of the accused), who formerly worked for Ross, was secretly passing confidential information about sales figures to another broker and friend (50-year-old (name withheld in order to protect the privacy of the accused).  The two are meant to have continued the scheme for approximately 3 years for a total of about 40 times.  Attorneys for the two men have argued publicly that the case against their clients is a travesty, considering that ex-Ross employee evidently made just as many trades in which he lost money as he did in which he gained funds.

The U.S. Securities and Exchange Commission’s website defines ‘insider trading’ as “both legal and illegal conduct.”  The difference between legal insider trading and illegal insider trading is the difference between selling and buying the stock in one’s own company versus selling and buying stock in someone else’s company. (18 United States Code 1348) When the ex-Ross employee provided information concerning the financial situation of Ross Stores, he was giving out information that he should not have.

Of course, the Justice Department is the body that prosecutes insider trading cases.  After the scandals of the early 2000s, the Sarbanes-Oxley Act made was passed, creating penalties that include a maximum of $5 million for each act that violates the law, in addition to up to 20 years in prison for each count.

 

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