Illegal insider trading when there is buying or selling the security (stocks or bonds) by persons based on nonpublic information about the security. A recent research study shows that has find that only 20% of all illegal insider trading is caught and prosecuted. The US Securities and Exchange Commission prosecutes approximately 50 insider trading cases per year, with penalties ranging up to 20 years in prison. Researchers from the University of Technology Sydney also found that insider trading occurs in one in five mergers and acquisitions and in one in five quarterly earnings announcements – implying there is at least four times more insider trading occurring than there are prosecution cases.
“Given the substantial penalties for convicted insider trading violations including financial, reputational, and potential jail time, and smaller potential profits, the probability of detection and prosecution has to be relatively low otherwise no one would attempt it,” Professor Putnins said.
Jeffrey Newman represents whistleblowers in SEC cases including insider trading cases. He can be reached at 617-823-3217