Insider Trading Defense in Miami

A well-timed trade is not a crime by itself. People trade for many reasons, and good timing happens. The government has to prove much more than that. Dennis Gonzalez Jr. is a former Miami-Dade prosecutor who has been defending people since 2012. We defend people who are under investigation or charged. Our office answers 24 hours a day.

Insider Trading Is Mainly a Federal Case

Florida's securities law, chapter 517, has a general anti-fraud section, but it has no section that specifically addresses insider trading. The specific insider trading rules discussed on this page are federal. Whether Florida's general anti-fraud section could apply to a particular trade is a separate legal question that this page does not answer. For Florida securities fraud, see Securities Fraud.

The Federal Law

• Section 10(b) of the Securities Exchange Act makes it unlawful to use any manipulative or deceptive device in connection with the purchase or sale of a security, in violation of SEC rules.
• SEC Rule 10b-5 makes it unlawful, in connection with buying or selling a security, to use a scheme to defraud, to make an untrue statement or leave out a material fact, or to engage in any act or practice that operates as a fraud or deceit.
• SEC Rule 10b5-1 says those prohibited deceptive devices include buying or selling a security on the basis of material nonpublic information about that security or its issuer, in breach of a duty of trust or confidence owed to the issuer, its shareholders, or the person who was the source of the information. Under the rule, a trade is "on the basis of" the information if the person was aware of it when trading, subject to the rule's defenses.
• The rule itself says that, beyond those points, the law of insider trading is defined by court decisions interpreting Rule 10b-5. That is why these cases are so fact-specific.

Criminal penalties

• Willful violations of the Exchange Act or its rules (other than its foreign-bribery provisions, which have their own penalties): up to 20 years in prison and a fine of up to $5,000,000 (up to $25,000,000 for a company). The law also says no one may be imprisoned for violating a rule if the person proves he or she had no knowledge of the rule.
• Securities fraud, 18 U.S.C. § 1348: prosecutors sometimes also charge this statute, which covers schemes to defraud in connection with securities of companies that have a class of securities registered with the SEC under the Exchange Act, or that must file reports with the SEC under that Act. It carries up to 25 years and a fine.
• Conspiracy charges are common when more than one person is involved.

The SEC can also bring a civil case. What you say to the SEC can be used in a criminal case.

Insiders, Tippers, and Tippees, in Plain Terms

• An insider is usually someone inside the company, such as an officer, director, or employee, who learns confidential information through the job.
• A tipper is someone who passes confidential information to someone else.
• A tippee is someone who receives the tip and trades on it, or passes it on again.

Whether a tipper or tippee is guilty depends on standards that come from court decisions, not from the text of the statute. In general terms, those standards look at whether a duty of trust or confidence was breached, what the people involved knew about where the information came from, and whether the person who passed it along did so for some personal benefit, which is not limited to money. The details matter, and they are often where the defense is.

Information can also come from outside the company, such as from lawyers, accountants, bankers, consultants, family members, or friends. Those cases raise their own questions about who owed a duty to whom.

Rule 10b5-1 Trading Plans

The SEC rule includes an affirmative defense for trades made under a contract, instruction, or written plan adopted before the person became aware of the information, if the plan meets the rule's conditions. Those conditions include:

• the plan sets the amount, price, and date, uses a written formula, or does not let the person influence later trades;
• the plan was adopted in good faith and not as part of a scheme to evade the rule;
• cooling-off periods before trading can start: for directors and officers, the later of 90 days after adoption or two business days after the company discloses its quarterly or annual financial results (with a 120-day maximum); for other persons (other than the company itself), 30 days;
• a signed certification by directors and officers that they were not aware of material nonpublic information and were acting in good faith; and
• limits on having overlapping plans.

The current, stricter version of these requirements has been in effect since February 27, 2023. A plan adopted under the older rules, or a plan that was changed, needs careful review.

Defense Issues We Look At

• Was the information really material and nonpublic? Rumors, public filings, analyst reports, and news coverage may already have been out there.
• Was the person aware of it when trading, or did the trade have another reason?
• Was there a duty, and was it breached?
• For tippees: what did the person know about where the information came from?
• Trading history: does the trade fit the person's normal pattern?
• A 10b5-1 plan: was there one, and did it meet the rule's conditions?
• Willfulness: the Exchange Act's criminal penalty requires a willful violation; the § 1348 charge requires knowing conduct.

What to Do If the SEC or Agents Contact You

1. Don't talk to SEC staff, FBI agents, or your company's investigators without a lawyer.
2. Don't call the person who supposedly tipped you, or anyone you may have told.
3. Don't delete texts, chats, call logs, emails, or brokerage records.
4. Don't make new trades in the stock until you've gotten advice.
5. Call us at (305) 209-0384.

If you expect to be charged, see Self-Surrender. If you are not a U.S. citizen, see Immigration Consequences.

Related Pages

• White Collar Crimes
• Economic & Financial Crimes
• Securities Fraud
• Trade Secret Theft and Corporate Espionage
• Money Laundering

Why Choose Dennis Gonzalez Law, P.A.

• Former Miami-Dade prosecutor.
• Defending people since 2012.
• Super Lawyers recognition and an Avvo Rating of 10.0.
• Bilingual office — se habla español.
• We answer 24 hours a day. Call (305) 209-0384.

You can read about some of our past cases on our Results page.

Frequently Asked Questions

I made money on a trade right before big news. Is that insider trading?

Not by itself. The government has to show more, including that you traded on the basis of material nonpublic information in breach of a duty. Good timing alone is not a crime.

Does Florida have its own insider trading crime?

Florida's securities chapter has no section specifically about insider trading. The specific insider trading rules are federal. Whether Florida's general anti-fraud section could reach a particular trade is a separate legal question.

I got a tip from a friend. Can I be charged?

Possibly. Whether a person who receives a tip is liable depends on standards set by court decisions, including what the person knew about where the tip came from. Talk to a lawyer before you talk to anyone else.

I traded under a 10b5-1 plan. Am I protected?

A plan can be a defense if it meets the rule's conditions, such as good faith and the required cooling-off period. Whether yours does needs review.

What's the maximum penalty?

For a willful violation of the Securities Exchange Act or its rules, up to 20 years and a fine of up to $5,000,000 for a person. The securities fraud statute carries up to 25 years. Those are maximums, not what every case gets.

How fast can you help?

Our office answers 24 hours a day. Call (305) 209-0384.