Insider+Trading

= = = Insider Trading =

It is important to provide employees with knowledge about insider training so that they know to refrain from trading their organization's securities or those of any entity with which the organization does business, and on how to avoid "tipping" third parties to trade on non-public, material information.

There are two types of insider trading, **legal** and **illegal**.
 * **Legal Insider Trading** is the buying and selling of stock by a company’s corporate insiders. Insider trading is legal when these corporate insiders trade stock of their own company and report these trades to the U.S. Securities and Exchange Commission.
 * **Illegal Insider Trading** is when a person bases their trade of stocks in a public company on information that the public does not know.

The SEC’s job is to make sure that all investors are making decisions based on the same information. Insider trading can be illegal because it destroys this level playing field.

An example of insider trading and what happens when you're involved in insider trading is Martha Stewart. According to U.S. Securities and Exchange Commission in a federal indictment, Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone stock in late 2001. The day following her sale, the stock value fell 18%. Martha Stewart was told by her friend Sam Waksal that his company ImClone’s cancer drug had been rejected by the Food and Drug Administration before this information was made public. This rejection was a huge blow to his company and the price of its stock went down dramatically.

On June 4, 2003, Stewart was indicted by the government on nine-counts including charges of securities fraud and obstruction of justice. Stewart voluntarily stepped down as CEO and Chairwoman of MSLO but stayed on as chief creative officer. She went on trial in January 2004. After a highly publicized, five-week jury trial that was the most closely watched of a wave of corporate fraud trials, Stewart was found guilty in March 2004 of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators and sentenced in July 2004 to serve a five month term in a federal correctional facility and a two year period of supervised release (to include five months of home confinement).

Questions to ask yourself to make sure you’re not insider trading…
 * Do I ensure that my discussions with relatives and friends avoid topics that are not yet public and that they could use to get an unfair advantage in the stock market or other areas of public financial trading?
 * Are my decisions about whether and when to buy B&B Enterprises stock or stock from other companies influenced by the facts I've learned as part of my role as a B&B Enterprise employee?

To watch the video of Martha Stewart on Larry King in 2004 talking about her trial and jail sentence, [|click here]