In 2019, the CFTC sent out an alert regarding insider trading or improper use of confidential information.
Insider trading consists in the illegal act of buying or selling on the stock exchange through “insider” knowledge gained through fraudulent and deceptive schemes. This includes gaining access to material, non-public information (MNPI) about a certain company and using this knowledge to make a trade, which then offers an unfair advantage to the trader.
Indicators and Types of Insider Trading
- Trading confidential information that the source was bound to protect.
- Brokers pre-hedging customer orders without their consent, based on knowledge about a forthcoming order.
- Using MNPI, obtained through the perpetrator’s employment and fraudulent action, to make an exchange or trade.
- Brokers or swap dealers sharing information on customer orders or other forms of MNPI.
Blowing the Whistle on Insider Trading
- Insider trading is a violation of the Securities Exchange Act so individuals may be eligible to participate in the SEC Whistleblower Program and earn significant SEC whistleblower awards.
- Individuals may report the violation to the CFTC by filing a Form TCR (Tip, Complaint, Referral). You do not have to be a trading firm employee or a direct victim of insider trading.
- If you have high-quality, original information that can lead to enforcement action of more than $1 million in monetary sanctions, you may be eligible for 10%-30% of the rewards from the CFTC or the SEC Whistleblower Program.
- This program also ensures confidentiality and anti-retaliation protections. Rewards and protection are facilitated under the SEC’s whistleblower anti-retaliation program, the CFTC, or the CEA Whistleblower Reward and Anti-Retaliation Law.
Whistleblowers seeking legal advice may contact Kohn, Kohn & Colapinto for a consultation.
