Illegal Insider Trading: A Working Knowledge of Recent Developments

Why Should You Attend:

The term insider trading commonly refers to illegal conduct. However, the term encompasses legal and illegal conduct. Trading by insiders such as officers, directors and employees buying and selling the stock of their employer companies is legal when effected pursuant to promulgated rules and restrictions. Illegal insider trading generally refers to buying or selling a security while in possession of material nonpublic information and in breach of a fiduciary duty or other relationship of trust and confidence. In the U.S., illegal insider trading is a crime punishable by disgorgement of profits, imposition of fines and imprisonment. Additionally, the SEC can bring civil proceedings and Self-Regulatory Organizations (SROs) similarly can take regulatory action to address this conduct.

Unlike most other countries, the U.S. does not have a statute prohibiting illegal insider trading. Recent court of appeals decisions have reversed guilty verdicts placing into question what constitutes illegal insider trading by narrowing what is needed to support a finding of illegal insider trading. This webinar will describe the environment and progression of this conduct in order to provide an understanding of the regulators efforts in detecting, investigating and prosecuting illegal insider trading.

Areas Covered in the Webinar:

• What is insider trading? Legal and illegal insider trading (SEC Rule 10b5 and 10b5-1 and 10b5-2).
• What is front running?
• History of insider trading and the insider trading securities and enforcement.
• The U.S. regulatory framework including the Justice Department, the SEC, SROs (FINRA and other markets) and other global jurisdictions.
• Detecting insider trading.
• Investigating insider trading – the sensitive SRO/federal interface.
• Prosecuting insider trading.
• Case studies – past and recent.
• What happens when a SRO/FINRA detects potential illegal insider trading?
• When can I plead the 5th Amendment to the U.S. Constitution preserving my right not to incriminate myself?
• The role of the new SEC Rule 613 – the Consolidated Audit Trail (CAT).

Who Will Benefit:

• Hedge fund managers
• Broker/dealer branch managers
• Compliance managers
• Research analysts
• Registered representatives
• SRO market surveillance (regulatory) analysts/investigators
• Training department

Instructor Profile:

Aldo Martinez is a retired NYSE regulation vice-president, founder of AJM Advisory Services, and currently a partner in the law firm of Vella, Singer and Martinez, P.C. While at the NYSE, he headed a department with the mission to detect and investigate market trading abuses such as insider trading, market manipulation and front running. Also while at the NYSE, Mr. Martinez worked in market surveillance, enforcement and was director of regulatory quality review. Additionally, he represented the NYSE in the Intermarket Surveillance Group (ISG), a network of then about 35 exchanges, markets and regulatory associations whose stated purpose was to cooperate with each other regarding regulatory efforts and served a term as chairperson of the ISG.

He holds a JD from Seton Hall School of Law, NJ and a BS in business administration from St. Peter’s University, NJ (SPU). He is an adjunct professor at SPU, teaching the MBA program.

His prior experience includes a position as assistant to the general counsel of former Spear, Leeds and Kellog (SLK) where he was involved with compliance matters. Mr. Martinez has consulted in developing regulatory frameworks in Australia, South America, Mexico and Eastern Europe where he has lectured and given seminars regarding securities regulation including detection, investigations and enforcement of market trading abuses including insider trading, market manipulation and others.

Topic Background:

Prosecutions and convictions for engaging in illegal insider trading has resulted in firms going out of business as well as individual reputations and careers destroyed. Allowing those in possession of material nonpublic information to take advantage of their position resulting from their fiduciary duties owed is not in the best interest of the capital raising process because such practice erodes the confidence of investors eventually causing a negative shift in securities investments.

To understand that illegal insider trading is a crime that has evolved and continues to evolve placing in jeopardy not only the corporate brand and reputation of publicly traded companies but of professionals as well, exposing each one to a complex array of prosecutions and other regulatory actions that include hefty fines, penalties, profit disgorgements and imprisonment is of paramount importance in an environment that has recently seen 31 convictions out of 35 prosecutions.

To prevent such hefty fines along with the bad press, possible jail time and even the closure of your financial institution, it is necessary to know how to detect illegal insider trading and what some of the major and most common red flags are for various types of situations that are susceptible to illegal insider trading such as significant corporate developments and a type of market insider trading such as front running or the trading ahead of an imminent transaction benefiting the entity acquiring the position.

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