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Criminal Prosecution for Insider Trading in New Jersey

The Washington Post in “DC lawyer charged in multimillion-dollar insider trading scheme” on April 6, 2011 showed a diagram that was displayed on an alleged scheme to trade inside information during an FBI news conference in Newark, New Jersey. A New York trader and a Washington DC lawyer at Wilson Sonsini Goodrich & Rosati were arrested for insider trading that went on for around 17 years. The attorney, age 50, and the trader, age 43, faced criminal prosecution by the US Attorney for New Jersey and civil charges from the Securities and Exchange Commission. The attorney made $290,000-a-year as a senior associate at his law firm, and previously worked at two other well known New York based law firms, where he allegedly pilfered secrets from the firms’ clients. The men often met in Atlantic City, NJ, where the gambling environment gave them an excuse for having a lot of cash.

Insider trading by people in fiduciary relationships like attorneys, accountants, and executives is the very reason for why there are securities laws requiring certain people to report their trades on at a New Jersey company they work for. When someone is appointed a Section 16 officer under the Securities Exchange Act of 1934, the officer of the issuer of any class of equity security shall file a statement with the Securities and Exchange Commission (SEC) on the amount of all equity securities of such issuer, of which he/she is the beneficial owner. Failure to disclose required information may result in civil or criminal action against persons involved for violations of federal securities laws.

The main purposes of Section 16 are to: (1) discourage trading on inside information by subjecting the trades of insiders to public scrutiny, (2) provide the public with information on which to base investment decisions by giving them an idea of the purchases and sales of insiders, which may indicate private opinion as to a company’s prospects, and (3) provide information for recovering any short-swing profits.

The Form 3 is used for the initial filing. When people do not follow SEC requirements for disclosing trades, they could get sued by shareholders, on top of the SEC using failure to disclose in investigations or litigation involving federal securities laws or other civil, criminal, or regulatory statutes, as well as for referral to other governmental authorities and self-regulatory organizations. Disclosure of information specified in the Form 3 is mandatory. Information disclosed will be a matter of public record and available for inspection by members of the public.

When faced with criminal charges for insider trading, engage a New Jersey criminal defense attorney who knows how to interpret securities and criminal statutes to reduce prison time and penalties. Contact the Law Office of Jason A. Volet at (732) 503-8968 or fill out the form on the right.

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