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Consultants could accidentally commit inside trading

Much insider trading is done intentionally. People with knowledge of upcoming business decisions make trades that will help them earn at the expense of others who do not have the same information. However, experts warn that this can be done accidentally, and consultants may be at risk.

Many people can be consultants to a company. This could include brokers, bankers, paralegals or lawyers. These consultants may be given non-public documents to help the executives at the company make decisions. If they then execute trades based off of these confidential documents, they could be accused of insider trading.

For example, if you are an accountant, you could be called in to talk with a business owner about the financial side of a merger. The owner may not have told investors that the small company is going to merge with a larger one, increasing the value of the shares. You find out about this before any official decisions are made because you're helping the owner get everything in order.

To you, it may be clear that now is a good time to buy stock in the company. It's selling for a low price and you know there will be a sharp jump when the merger is announced. If you get in early, you can make a lot when that increase comes.

You may not realize that using this information could be considered insider trading, as you didn't seek it out with the intent of making a trade. You just learned about it in the course of your job.

This is how accidental insider trading happens, and you could face charges. If so, don't panic. Just make sure you know all of the legal options that you have in Kansas.

Source: Money Crashers, "What Is Insider Trading and How to Avoid It – Definition, Laws & Cases," Kalen Smith, accessed June 03, 2016

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