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Learning the Inside Scoop on Securities Law… the Hard Way

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Learning the Inside Scoop on Securities Law… the Hard Way

Enforcement activity involving insider trading has seen an increase of late. And that has prompted publicly traded organizations to rethink their attitude on the subject. Do you really understand insider trading? Do your employees? Do you think just because you don’t have company-issued stock options that Insider Trading laws don’t impact you? Probably not so, ask Doug DeCinces.

The former Baltimore Oriole baseball player who was recently indicted by a federal grand jury on securities fraud charges, for allegedly cashing in on inside information and for tipping. Earlier DeCinces, paid $2.5 million in fines to settle his civil case but did not admit to wrongdoing.

The inside information was allegedly gained when DeCinces talked with neighbor and fellow golfer (former chairman and CEO Advanced Medical) days before the sale of Advanced to Abbott. Prosecutors say DeCinces profited illegally by $1.3M. He can get jail time if convicted of the allegations.

This case illustrates the serious legal exposure – civil and criminal (including money laundering) – if you act on a tip associated with such allegations. It also proves the extent of market oversight; DeCinces is not a securities market professional, he is a retired baseball star. And, it is indicative of the breadth of the regulatory concern in terms of time – it relates to a 2009 deal – and covered persons. In addition to DeCinces, his tippees are being pursued, and his tipper has been publicly implicated.

Training your workforce on insider trading – what is it, why it’s harmful, who insiders are and how to recognize inside information – can help keep your company and employees safe from scrutiny and possible prosecution. Insider trading training helps employees be able to recognize risky activity while honoring their duty to their company and following ethical – and legal – trading practices.

Being implicated in illegal Insider Trading activity is serious business. If you know something material, and non-public, you must disclose. Otherwise, don’t trade (and risk getting prosecuted).

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