You are on a crowded elevator standing next to a couple of executives from a company with offices on the floor just above yours. They are talking in low tones about a surprise announcement coming the next day. Their firm, AGA Software, is being sold to a big, famous technology company! “My options are going to be worth millions!” you hear one of them whisper to the other. Assuming AGA is a publicly traded stock, can you run home and buy AGA shares without breaking the law? Knowing when you can legally trade on inside information and when you cannot is tricky. This article will help you better understand the legal minefield.The authorities (the U.S. Securities and Exchange Commission for civil cases and the U.S. Department of Justice for criminal cases) must prove several specific elements to convict someone for trading on or tipping confidential corporate information. First, a security must be bought or sold. Second, the trade must have been prompted by the possession of material, nonpublic information. Third, the defendant, whether a trader or tipper, must know that the information he or she is dealing with is “hot property.&
