Insider trading is not just wrong; it can destroy your career. The people at the SEC are very serious about it. They watch everyone who works with money.
It doesn’t matter if you didn’t mean to do it. It doesn’t matter if you only told one person. If you work in finance, you are being watched.
Here are 8 measures to keep yourself and your company safe from insider trading problems.
1. Always Think Someone Is Watching You
The SEC isn’t slow or dumb anymore. They have very smart computer programs. These programs track everything you do. They look at all your stock trades. They read all your emails. They even keep an eye on your text messages. That small piece of stock advice you gave to your brother or sister-in-law? The SEC can find out about it.
That trade you made that seemed lucky, right before a company announced good news? They have probably already noticed it. You need to act like everything you do at work is being recorded. Because, most likely, it is.
The SEC’s new technology is very good at finding things that look suspicious. They can compare when you traded stocks with when companies announced important information. They can also look at who you talked to before you made those trades. This means that even small, seemingly harmless actions can be seen as insider trading. So, it’s best to always be careful and assume that your work life is being watched closely.
2. Lock Up Secret Information Like It’s Super Important
If you are working on a business deal, you must be very quiet about it. Don’t talk about it in a general way at a bar with friends. Don’t even give small hints to your husband or wife. Don’t brag about it to your old friends from college. The moment secret information that hasn’t been shared with the public leaves your mouth, you could be in big trouble.
The best companies have rules called “Chinese Walls.” These are like strong barriers between different teams in the company. For example, the bankers who are working on a deal are kept separate from the traders who buy and sell stocks. This stops the bankers from accidentally or on purpose telling the traders secret information.
If your company doesn’t have these kinds of strong rules, you should ask for them. These rules are very important for keeping everyone safe from insider trading problems.
3. Don’t Trade Your Own Stocks When Things Are Sensitive
You might think it’s okay to trade stocks in companies that aren’t involved in the big deals you’re working on. But that’s not true. The SEC looks for patterns in all your trading. If they see you suddenly buying or selling any stock around the time of a big company event, they will likely think the worst. They might think you are trading based on secret information you know from your job.
The safest thing to do is to have full “blackout periods.” This means that during certain sensitive times, like when your company is about to announce something important, you are not allowed to trade any stocks at all. This rule should apply to everyone – not just you, but also your family and any accounts you control. No exceptions. This way, there’s no chance it will look like you were trading on inside information.
4. Get Permission Before You Make Any Trade
Yes, it can be annoying to ask for permission every time you want to trade. Yes, it can make things slower. But guess what? That record of asking for permission is the only thing that can protect you if the SEC starts asking questions. If you didn’t get approval before a trade, you have no good way to defend yourself. It’s that simple.
When you ask for permission, the company’s compliance department reviews your planned trade. They make sure it doesn’t look like you are trading based on secret information. If they approve the trade, you have a document showing that you followed the rules. This paper trail is very important if the SEC ever investigates.
5. Take Compliance Training Very Seriously
Most people don’t pay much attention during compliance training meetings. This is a big mistake. The SEC doesn’t care if you say you “didn’t know” the rules. Not knowing the rules is not a valid excuse. You need to learn what MNPI (Material Non-Public Information) is. This is secret information that would likely cause a company’s stock price to change if it were made public.
You also need to know exactly who to call at your company if you are ever unsure about something. And most importantly, if you see anything that looks suspicious, you must report it right away. Don’t wait. Report it before it causes problems for the company and for you personally. These training sessions teach you the rules you must follow to stay out of trouble.
6. Assume Your Friends and Family Might Cause Problems for You
That friend who always asks for stock tips? He is a risk. Your wife who says she would never tell anyone? She might accidentally say something. The only way to be completely safe is to never talk about your work trades with anyone outside of work. Ever. If they ask, just say: “I can’t talk about that. It’s against SEC rules.” End the conversation there.
Even people you trust very much can unintentionally cause problems. They might not understand the importance of keeping information secret. Or they might say something without realizing it could be seen as insider trading. To protect yourself, it’s best to keep your work life and your personal life completely separate when it comes to sensitive information.
7. Never Delete Anything, No Matter What
If you even hear that there might be an investigation, you need to stop deleting anything right away. Deleting emails, text messages, or computer files related to the investigation is a serious crime. It’s called obstruction of justice. You could go to prison for this, even if you didn’t do any insider trading in the first place.
Even “normal” cleaning up of your old emails can look suspicious if there’s an investigation. If the SEC sends you a legal request for information (a subpoena), your only response should be to say: “I will fully cooperate with my lawyer present.” Then, don’t say anything else and call a lawyer who knows about these kinds of cases immediately.
8. The Culture of Your Company Is Your Last Defense
If the people at your company joke about insider trading, you should be worried. The best companies treat following the rules like it’s a religion. They reward people who report wrongdoing (whistleblowers). They fire people even for just hinting at leaking secret information. If your boss acts like some things are okay when they are actually against the rules, you are working at the wrong place.
A strong culture of compliance means that everyone in the company understands how important it is to follow the rules. It means that people feel safe to speak up if they see something wrong. And it means that the company takes rule-breaking very seriously. If your company doesn’t have this kind of culture, it puts everyone at risk.
Final Idea
The people who get caught doing insider trading always say the same thing: “I didn’t think it was a big deal.” But the people who stay out of trouble are the ones who assume everything is a big deal.
They check every single trade very carefully. They report anything that seems even a little bit strange. They act like the SEC is listening to every conversation they have.
Because in the world of finance, looking like you might have done something wrong can be almost as bad as actually being guilty. So, it’s always better to be too careful than not careful enough.
Pay close attention to the rules, always ask questions if you’re not sure, and always act like someone is watching you. This is the best way to protect yourself and your career.
