Legal Question in Securities Law in California

I have a question on what qualifies as "insider trading".

Let's say I invent something cool. And I want to approach Company X and ask them if they will like to buy my idea. I am confident they will. In fact, I am so confident that I tell all my friends: "Hey guys, buy Company X's stock right now. Their stock is low now, but after I approach them and sell them this product, it will shoot through the roof!"

Is this illegal? Does it violate any trade laws or qualify as "insider trading"?

Asked on 8/06/16, 4:10 am

1 Answer from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

It's probably illegal in a technical sense, like it's illegal to drive 56 mph on an empty country road posted for 55, but your real hazard is not being prosecuted for promoting securities without a license (or whatever). More probably, you'll create enemies among your friends when they invest and don't get the touted results ......... and they might even bring private lawsuits. As to insider trading, you aren't an "insider" until you have a contract with Company X, but you might still violate other laws dealing with promoting and selling securities through excessive promotion of X to others.

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Answered on 8/07/16, 11:43 am

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