We’ve all heard of insider trading but what is it exactly?
Insider trading is when you benefit financially from information that hasn’t been made public. So if you know that Yum Brands stock is about to take a dive because another employee gave you inside information in private, or that the company is going to be bought out at the beginning of the new year, it is illegal for you to sell your company stock before it possibly takes a dive in the stock market.
Remember Martha Stewart? She went to prison for insider trading. She received a secret tip before the information was made public and that her shares in ImClone were going to decrease in value by 16 percent in one day. Stewart sold her shares, saving her more than 45 thousand dollars. However, she traded the value of her money for the value of her time when she was arrested.
Click for more on insider trading and Stewart’s indictment
Some insider trading is legal. For example, when Yum Brands Inc. decided to sell off part its business in China to leading investors, shareholders here in the states received a percentage of stock in the new Yum China spinoff. These new stocks will benefit from a three percent annual dividend made to Yum Brands Inc. The company decided to inform, and reward, its investors collectively ahead of the spinoff in China.
Watch the full story on the Yum China spinoff
As you can see, there is a right way and a wrong way to cash in on financial opportunities. If a person is found guilty of insider trading, a U.S. attorney will handle the case, and they could face fines up to five million dollars and up to 20 years in prison for each illegal act. Wow!
This seems like a harsh risk that doesn’t weigh out the reward. We take pride in our employees here at Yum Brands, which is why we offer our workers such a great benefits package. You are the most valuable asset to our company and your happiness is the key to our success. The information that is made available to you everyday is trusted to you in confidentiality.
So if you think that you might be able to make a few extra dollars by exploiting nonpublic information, just think of Martha Stewart in an orange jumpsuit.