Are insider trading laws unconstitutional?

South Carolinians must be careful with their stock trading if they are in possession of material nonpublic information. If they act on it, they could be charged with the crime of insider trading. This is exactly what happened to an attorney for Apple who allegedly executed trades over a period of years knowing certain information that the public did not.

This attorney was able to review Apple’s quarterly earnings report before it was released. An earnings report is also a piece of information that can move the share price dramatically and is definitely considered nonpublic. The lawyer knew that because he warned others not to execute trades in the stock until the earnings report was released. At the same time, he was making approximately $227,000 on his trades and avoiding much more in potential losses.

The attorney’s defense is not that he did not execute the trades at issue. Instead, he attacks the constitutionality of the charges against him. He argues that criminal indictments for insider trading are not permitted by the Constitution because the behavior is not specifically prohibited by a statute. Instead, he argues that it is an entirely judge-made doctrine that cannot serve as the basis for a conviction. The United States Supreme Court has already heard a similar challenge in the past to an insider trading charge and has rejected it.

If the Securities and Exchange Commission contacts someone for more information about their trading, that individual may benefit from legal advice. SEC Enforcement knows exactly what they are doing and what they are looking for, and it is best not to face them alone. At the same time, a white collar crimes attorney may be able to help their client speak to the SEC and possibly negotiate some kind of settlement before it reaches a criminal indictment.