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Does hacking constitute securities fraud?

In the business world, business owners and their employees are required to abide by a rather extensive list of state and federal laws that define which actions are legal and which ones are not. Failing to abide by these can land employees and the company in hot water, specifically facing serious criminal charges in some cases.

But what about illegal activities that fit within the scope of business law that are not committed by parties to a specific company? This is where our unique question above comes to light: Does hacking constitute securities fraud? And it's something we'd like our readers to consider.

Two years ago, we answered the question "Do you know what constitutes security fraud?" In that post, we explained that securities fraud "encompasses a series of activities that are deemed to be illegal." From insider trading to third-party misrepresentation, the term certainly has wide reach and even more serious consequences. For the sake of answering today's question, let's look specifically at insider trading.

According to the U.S. Securities and Exchange Commission, insider trading occurs when an individual buys or sells stock based on information that is not available to the general public. Doing so constitutes a breach of fiduciary duty and can lead to criminal charges.

As a New York Times article points out, you should be able to apply this definition to hackers who steal company information then use it to buy and sell stocks. But as the article also points out, the current wording of the law makes it difficult to charge hackers with securities fraud crimes because they are more like thieves than insiders for the company. This doesn't mean a hackers decision to steal company information is any less illegal, it just defines how that individual is prosecuted under the law.

Whether you're an individual being accused of securities fraud or part of an entire company, our answer to the question above shows just how complex securities law can be and how difficult it can be sometimes to apply the law. In these types of cases, it's typically considered a good idea to hire an attorney with considerable experience in this area of the law so that you can be sure you are presenting the best possible defense against allegations.

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