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Can anyone be accused of insider trading?

Most of the time, "insiders" are those who own at least 10 percent of a company's stock or some type of high-end executive.

After all, insider trading is simply using information that has never been released to the public to make a trade that then turns profitable based on that information. The stock market is intended to offer the same opportunity to all, so only public information can legally be used.

As you can imagine, executives and high-level investors are those often in a position to glean useful information prior to public release, so they're often implicated in these situations.

However, it is important to note that anyone can be accused of insider trading. It doesn't matter if you're connected to the company. All you need is that confidential information that causes you to trade well before the public sees what's happening.

For instance, perhaps you're a barber. The chief executive officer (CEO) of a local corporation comes in one afternoon to get a haircut. The quarterly earnings reports haven't come out yet, but that CEO accidentally tells you -- he or she is really just bragging -- what the earnings were.

Armed with this information, you make a trade. The earnings are way higher than anyone expected. You know that stock is going to get hot when the reports come out. By using that information, which you never should have possessed, you set yourself up to make a lot of money when other investors jump in and double the value of the stock in just a few days.

If you are facing charges for insider trading, be sure you know all of the legal options you have. These are very serious allegations with potentially substantial ramifications upon conviction.

Source: Investopedia, "What exactly is insider trading?," accessed Jan. 31, 2018

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