Is it legal if I use certain information in the stock market before I pass it to my clients?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Is it legal if I use certain information in the stock market before I pass it to my clients?
I’m building an app where I give stock ideas to my clients on the basis of
incoming breaking news i.e buy or sell a stock on the basis of the incoming
news. The clients have to take a monthly subscription. Is it legal if I pass on
the information to my clients after a 5-10 second delay i.e. time required for
me to act on that news?
Asked on September 24, 2017 under Business Law, Illinois
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
It's not even remotely legal. First, under the Investment Advisors (or "Advisers") Act, you may well have to register as an investment adviser (i.e. there is a considerable likelihood you must register) and, if you do, are bound by a fiduciary duty which would make giving yourself an advantage over your clients illegal. (And if you are required to register but do not, that is itself illegal.) You are strongly advised to study this Act and compare it to the details of what you propose to do to see if you must register and, if so, to understand the strictures then placed upon you.
Second, unless you are telling your clients that you are "front running" by trading ahead of them, you will be committing fraud. To avoid committing fraud, you would have to discose to people signing up for your service that it's not real time, but is time-delayed so you can act first.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.