Trading (with Forex) is one of the professions that attract young people most of all in recent times. Interest is also growing thanks to the large earnings that seem to be at hand. All this only increases media attention on the financial market.
When it comes to the financial market, profits are so large that many people are thrown in, especially when it comes to the managers of multinationals that often control dizzying capital. There are more and more ways to do business especially in recent times with the development of tools that use the network, unthinkable in the first place. Information, as in any market, remains fundamental and those who own it have a great treasure to handle with extreme caution.
But with the increasing likelihood of crime, it is also on the increase. Possibilities previously unknown open not only to those who work honestly but also for those who want to circumvent the rules a little to ensure high profits and secure.
Insider trading is one of these new crimes, which consists of the abuse of privileged information, news that is still not public, and the exploitation of this information to obtain profits, aware of how this information will change the market when it is public.
The problem is the speculative part of this process, which is prohibited by law. Confidential market information obtained for example as a member of administrative or management bodies may not be used to conduct business in the financial market. Of course, those who recover this type of information in a completely accidental manner are excluded from this mechanism.
Exploiting information that is not yet publicly available allows insider trading to significantly alter the risk factor that continues to weigh on other investors.
Therefore, by law, this type of person cannot buy, sell or carry out other transactions, directly or indirectly, on his/her own behalf or on behalf of third parties, on financial instruments using the inside information in his/her possession; and furthermore, he/she cannot communicate to others the inside information outside the normal exercise of his/her work, or even recommend or induce other persons, on the basis of the inside information in his/her possession, to carry out such transactions.
In addition to the criminal offence, Italian law attributes the administrative offence to the insider. The two convictions are therefore added together in the trial.
The 2004 EU law, which was implemented in Italy with 62/2005, has included in our legal system some new features such as the stricter sentences, which include imprisonment from one to six years and fines up to three million euro, the judge can then increase the fine up to three times or up to the greater amount of ten times the product or profit obtained from the crime of agiotage. This happens for the so-called "Primary Insider", that is the one who, having the information, decides to exploit it for illicit profits in the financial market. The figure of the secondary insider was then identified, that is, who exploits information obtained from the primary, but who is only guilty of administrative offence.
Let us take one example: Bank of America.
A well-known case is that of Bank of America Merryl Lynch, which in 2013, the day before Saipem issued the profit warning and brought down its stock by a devastating 34% sold all its shares for a value of 300 million dollars. Furthermore, a Portuguese company that had decided to buy half of the shares, we are talking about Amorim, has sued Bank of America because in its opinion, knowing the profit warning had cheated them by pushing them to buy the shares. After numerous internet investigations, Bank of America was completely cleared of all charges because it appears that BofA had no evidence of the imminent profit warning.
Insider trading is therefore a type of trading that is absolutely illegal. Trading public companies through equities or other financial markets (such as bonds or options) by individuals with confidential information about the company is considered illegal.
However, it is possible to obtain excellent returns even without becoming an insider trader, or cheating through any other similar "trick". Updating through newspapers (such as the one mentioned above) is undoubtedly of vital importance, as it allows to obtain information from a technical, macroeconomic and much more. It is very important to consider that Insider Trading is a crime, and you could be subject to high fines if you are caught in the act. To date, thanks to the 2004 EU law, the penalties for insider traders can be up to a term of imprisonment of one to six years with fines of up to 3 million euros.
Secondary" insiders (i.e. those who receive news from first level insiders) commit only an administrative offence and not a crime. It is very important to try to avoid this behaviour, just as it is important to be away from the primary insider, dangerous characters always ready to sell this information within the markets. The best solution to stay up to date with trading news is to opt for online trading blogs and forums, effective and vital resources for retail traders in the financial markets.
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