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Investors are Protected under a Range of State and Federal Trade Laws

Posted by on Apr 29, 2017 in Insider Training | 0 comments

Investors are Protected under a Range of State and Federal Trade Laws

Though it does not mean that all investing is productive, it, nonetheless, almost always generate tools of production: a financier is a nourisher of business and thereby a stimulator of production.

A securities market has three principal functions:

  • It is created to help finance growing, or sometimes new, corporations.
  • It helps investors and lenders to locate se­curities which meet their objec­tives.
  • It provides liquidity, to vary­ing degrees, for the securities traded within its domain.

The lines above are contained in “The Nature of Puts & Calls,’” a book was authored by Mr. Anthony M. Reinach in 1961.

Due to the vital role the securities market plays in this country’s economic development, the U.S. Securities and Exchange Commission (SEC) makes detection and prosecution of insider trading violations one of its enforcement priorities, so as not to damage the confidence and belief of investors in the objectivity and integrity of the securities market.

Most investors associate insider trading with illegal conduct; the SEC, however, uses it to refer to both legal and illegal conduct. Legally, insider trading refers to the buying and selling of stocks by officers, directors, and employees and other corporate insiders in their own companies; it only requires corporate insiders to report to the SEC any trading activity they conduct involving their own securities.

Illegal insider trading, meanwhile, according to SEC definition, is “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, non-public information about the security. Insider trading violations may also include ‘tipping’ such information, securities trading by the person ‘tipped,’ and securities trading by those who misappropriate such information.” (

Illegal insider trading can be committed by: corporate officers, directors, employees; “tippees” of corporate officers, directors, and employees, such as business associates, friends, or family members; employees of printing, banking, brokerage or law firms; government employees; or anyone who misuses, and takes advantage of, confidential information from his/her employer.

According to the law firm Williams Kherkher, “When you hire a securities and investment firm to handle your investments and savings, you have a reasonable expectation that the company or individual will act in good faith to protect your money and deliver the service that you signed up for. The actions of a dishonest investment adviser or stockbroker can be enough to cause irreparable harm to your investments, your financial security, and your future. As devastating as it can be when your investments take a hit, it is important to remember that investors are protected under a range of state and federal trade laws. As such, there is a good chance you will be able to take legal action against whoever is found to be responsible for the illegal or unethical actions that culminated in your losses.”

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