Which of the following represents a legal consequence of insider trading?

Insider trading, which involves trading stocks or other securities based on non-public, material information, has serious legal consequences designed to uphold market integrity and protect investors. The correct answer highlights that individuals involved in insider trading can face criminal charges and potential imprisonment. This stems from the recognition that insider trading undermines public trust in securities markets and creates an unlevel playing field for investors.

In many jurisdictions, including under U.S. federal law, insider trading is treated as a significant crime. Offenders may be prosecuted and could face hefty fines, and, in severe cases, imprisonment for engaging in such unlawful practices. The criminal penalties are intended to deter such activities and reinforce the principle that all investors should have access to the same information when making investment decisions.

Understanding the severity of these legal consequences is crucial for parties involved in securities transactions. This ensures that individuals are aware that engaging in insider trading is not only a breach of fiduciary duty but also a violation of the law that can lead to significant penalties.