A contemporaneous-trader is a trader who enters an order on the other side of the market at the same time as a trader with inside information enters an order. Contemporaneous traders can sue traders who act on inside information to recover losses.
If an investor in possession of non-public material information, enters an order for a security based on that information, the investor has broken the law. An investor who trades on inside information maybe required to repay the investors with whom his order was executed. In addition to being required to repay the contemporaneous traders, the investor may be subject to criminal prosecution. Firms are required to have safeguards in place to ensure that its employees do not come into possession of non-public material information. Firms that engage in investment banking must have a firewall in place so that information does not flow between the investment banking or merger and acquisitions to the retail and trading departments. Be sure that you have mastered the the rules and regulations surrounding the Insider Trading and Securities Fraud Enforcement Act as you are likely to see several questions relating to its application on your exam. Pass your exam or your money back with our GreenLight pass guarantee.
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