store manager advises a staff member to pull his stock from his 401k, because our company’s stock is about to crash. Is that illegal?

Asked on May 19, 2009 under Criminal Law, North Carolina

Answers:

B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

This can cause a problem with what are called "insider trading" rules of the federal Securities and Exchange Commission ("SEC").  If you buy or stock based on information that is not available to the public, and you profit (or shift losses over to whoever sells or buys the stock) because of that, you can be forced to give back the money that is the difference between where you ended up, and where you would have been if you hadn't had the unfair advantage.

This isn't often enforced against small investors.  And if the store manager isn't giving advice based on something he knows just because he's the store manager, it isn't "insider" information.

Some very fine hairs get split on these questions, sometimes.  An attorney who practices business and securities law can give you more information, based on the unique facts of your situation.  One place you can look for a lawyer to help you with this is our website, http://attorneypages.com


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