Finding out you’re under investigation for insider trading can jolt you in a way few things can. Maybe you received a letter from the SEC or your employer’s compliance department called you in for a meeting. Or perhaps federal agents showed up with questions about trades you made months or even years ago. No matter how it begins, the situation can feel urgent and confusing.
You can’t change the fact that an investigation has started, but you can control how you respond. The next steps you take will influence how long the process lasts and ultimately whether the case escalates or fades.
Here’s how to approach it with clarity.
1. Take the Investigation Seriously
A common mistake people make is assuming the investigation is a misunderstanding that will disappear on its own. Insider trading cases rarely work that way. Once federal regulators open a file, they’re signaling that something about your trading activity has already raised serious suspicion.
Even innocent behavior can look questionable without context. That’s why you should treat every communication from regulators as serious and time-sensitive. Read everything carefully and don’t guess or ignore deadlines. This isn’t the moment to handle things casually or try to explain your situation off the cuff. Your words matter, and investigators document everything.
2. Consult a Defense Attorney Before Speaking to Anyone
Before you answer a question or offer an explanation to the SEC, FINRA, FBI, or your employer, you need legal guidance. Insider trading laws are complex, and investigators are trained to notice inconsistencies. Even an innocent comment can be taken out of context and used against you later.
An attorney helps you:
- Understand the scope of the investigation
- Avoid statements that may be misinterpreted
- Respond appropriately to requests for records
- Protect your rights during interviews or testimony
You aren’t required to navigate this alone, and you shouldn’t. Once an attorney steps in, they can handle the bulk of what comes next. Your job is to simply listen to their advice and follow it.
3. Gather Documentation While You Still Can
Memory fades quickly, especially when investigators ask about trades from years past. If you wait too long, you may not remember why you bought or sold a particular security, who you spoke with, or what public information influenced your decision at the time. That’s why you should start collecting:
- Emails related to your trading decisions
- Research reports or news articles you reviewed
- Calendar entries or meeting notes
- Brokerage statements and trade confirmations
- Compliance training records from your employer
These documents help you reconstruct your reasoning and establish whether you acted based on public information. They can also help your attorney build a defense before regulators form an opinion. (The worst position to be in is scrambling for records after investigators have already drawn conclusions.)
4. Stop Talking About the Case With Colleagues or Friends
When something stressful happens, the instinct is to talk it out. But with an insider trading investigation, casual conversations can create new problems.
People may misremember what you said, repeat it inaccurately, or unintentionally share details that complicate your situation. If colleagues are also being questioned, their statements could conflict with yours – even if both accounts are honest.
Limit conversations to your attorney. (Not your boss or your coworkers. And, no, not even friends or family.) Once an investigation is active, silence protects you way more than speculation or casual explanations ever could.
5. Understand What Counts as Insider Trading
Many people assume insider trading only applies to big scandals involving executives and massive stock dumps. In reality, insider trading allegations cover a wide range of scenarios – some involving small trades made by everyday employees. The definition hinges on two questions:
- Did you possess material, nonpublic information at the time of the trade?
- Did you benefit from trading before the information was public?
As The Law Offices of Seth Kretzer explains, “Insiders in a company – such as officers, major shareholders, and corporate directors – can trade securities within their own company, but they are required to report their trades to the SEC. If they don’t – and if they use information that is not available to the public to trade securities – this is an insider trading violation.”
That means even routine trading becomes suspicious if the timing lines up with news the public didn’t yet know. Investigators look for patterns: who you met with, what information flowed through your department, and whether your trades seemed unusually well-timed.
6. Prepare for a Long Process
Even straightforward insider trading investigations can stretch out. Regulators may issue multiple rounds of document requests, interview several people, and compare your account against market records and communication logs.
During this time, it’s normal to feel anxious or impatient. But reacting emotionally can lead to rushed decisions that make things worse. Instead, mentally prepare for a slow pace and stay organized.
Adding it Up
Investigations can affect your job, your licenses, and your standing in your industry. You don’t control the investigation, but you do control how professionally you conduct yourself during it.
Make sure you don’t act emotionally or do anything rash. Hire an attorney and follow their advice to get the best results possible.
