The term “white collar crime” encompasses a wide range of offenses involving elements of theft or fraud. The offense of embezzlement, for example, involves outright theft from an employer. Other white collar offenses are more complicated and much more difficult for prosecutors to prove. Federal securities laws do not define a specific offense called “insider trading,” but it is a well-known term in this area of law. Insider trading is a type of securities fraud that involves the use of information that is not available to the public. This is usually “inside information” about a corporation that affects trades in that company’s stock. A recently filed indictment goes in a different direction, alleging the use of nonpublic information from a government agency. United States v. Blaszczak, et al., No. 1:17-cr-00308, indictment (S.D.N.Y., May 24, 2017). The case involves a relatively unknown industry known as “political intelligence,” in which consultants obtain information about government operations for clients.
The Securities Exchange Act of 1934 regulates the trading of securities. Insider trading occurs when a person who has inside access to a corporation with publicly traded stock uses information that is available to them as an insider, and therefore not available to the public, to make a decision about trading that corporation’s stock. This puts all other stockholders and potential stockholders at a disadvantage, and it can affect the market as a whole. If, for example, a corporate insider learns that the corporation is going to be the target of an upcoming government investigation, it might constitute insider trading for that insider to sell all or most of their stock before any public announcement of the investigation. The news is likely to have a negative effect on the stock’s price, but the insider has an unfair advantage because of their access to information.
Rather than corporate inside information, the Blaszczak case involves inside information about a government agency. The field of “political intelligence” is difficult to define. It essentially involves consultants with access to government officials. The consultants are able to obtain useful information about government operations for their clients, who are often hedge funds and other investors. In order to be valuable, the information must not be generally available to the public. In this way, it resembles inside corporate information.