Get the loan terms in writing. The employee is going to legally own the stock (and the tax consequences, good or bad). If the company does go public successfully, how are the profits split? If the company fails and the investment becomes worthless, how does that work? Done poorly, this is the kind of thing that can really damage family relationships.
Every time there is a question about insider trading tons of people come out and give this ridiculous answers.
If someone is offered stock in a privately held company they can buy it as long as that doesn't run afoul of some SEC rule about private offerings (largely SEC Reg D). It would be nearly impossible to do any illegal insider trading on Reg D offerings which by definition are private offerings thus not subject to the same kind of oversight of SEC on insider trading. I have never even heard of someone getting busted for participation in a PIPE (private offering of publicly traded stock) as insider trading though I suppose I can see how that happened.
There is never an issue about how a stock purchase is financed in insider trading and a person lending money to someone can't possibly be involved in insider trading.
Insider trading" is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders―officers, directors, and employees―buy and sell stock in their own companies
Insider trading is defined as a malpractice wherein trade of a company's securities is undertaken by people who by virtue of their work have access to the otherwise non public information.
That doesn't make sense. If the company has stock it is already public. By definition, private companies don't issue stock to the public.
My understanding:
Borrowing to buy stock, in and of itself, is not relevant to the definition of insider trading. That's just buying on margin.The idea of "straw purchaser", however, IS relevant, and THAT is almost always illegal whether or not insider information is used or available, because it's usually tax fraud. If this is not a hypothetical scenario, you are treading VERY dangerous ground.
no, unless th person making or getting the loan has inside info about the company
Also the family member works for said company^^^^^^^^^
Never borrow from, or lend to. a friend or family member - therein lays potential trouble.
No it is not
If a person loans a family member money, and that money is being used to buy stock in a company with the hopes, but not certainty, that the company will someday soon go public- is that considered insider trading?
if he is the treasurer, maybe
otherwise, no
No.
