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SEC methods for detecting insider trading

On Behalf of | May 3, 2022 | Federal Securities Law |

The U.S. Securities and Exchange Commission (SEC) has its own methods of tracking the illegal practice of insider trading. The purpose is to ensure that no one has an unfair upper hand in trading on the stock exchange. The SEC has a responsibility to protect the integrity of the trading system In Pennsylvania, investors who are familiar with securities laws should become more aware of insider trading.

Tracking methods

Surveillance of activities that occur in the stock market is the most effective method used to monitor trading practices. Since insider traders are not always open to speaking openly, the SEC must resort to monitoring their trading behaviors and activities closely. Every fast, high-priced trade, or any activity that seems suspicious to anti-fraud experts, is marked for further review and may be reported for an SEC investigation.

The SEC collects tips from members of the public to detect the early signs of securities crimes. They review countless emails and phone calls from family members, friends, employees, employers or coworkers of the suspect. People are also allowed to record suspicious conversations that involve illegal trades. In addition, securities law provides payments to whistleblowers who find and uncover acts of wrongdoing.

The discovery of securities crimes

The SEC has processes for the detection of illegal insider trading activities. The stock exchange is a large market where proving insider information is very difficult due to circumstantial evidence. The SEC handles the entire process of discovering, investigating and filing charges for the crime of insider trading. Once they discover an illegal activity, they perform an investigation and decide if they should file civil and criminal charges against the perpetrators.

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