Laws governing insider trading
Insider trading remains a controversial issue in the American public domain. Most individuals perceive the practice as being illegal. However, insider trading can both be legal and illegal practice. The provisions of the American law dictate that any form of insider trading should be reported to the U. S. Securities and Exchange Commission (SEC) to make it legal (Miller & Jentz, 2009). This has the implication that the transaction is not kept a secret for access by the general public.
On the other hand, insider trading is termed illegal if the transaction is based on information that is not accessible to public. Indeed, it is not only illegal to trade one’s company in the stock market based on non-public information but even to give another person the information enabling them to trade their stock (Miller & Jentz, 2009). This paper seeks to identify the ethical and legal aspects of insider trading practices in the business world.
In particular, the author gives an argument is support of the claim that imposing measures to control insider trading is crucial in protecting the economic interest of public investors. Definition of insider trading Insider trading is defined as the act of trading the securities (stock or bonds) of a corporation by members with reliable access to non-public information on the given organization (Miller & Jentz, 2009). Such individual might include but not limited to employees, directors, and major shareholders in the company as well as other officers.
The practice of insider trading is termed as non-illegal if the transactions are not executed based on the individual’s knowledge to non-public information about the company (Miller & Jentz, 2009). Nevertheless, the term commonly refers to actions in which the parties involve engage in breach of trust and confidentiality of non-public information. As an example, insider trading can involve trading of stock based on information such as profit results or takeover of an organization before such information is made public (Miller & Jentz, 2009).
Another example is were an individual, having prior information of a large order in the stock, trades on such before the order is executed leading to a potential price impact. Ethics governing insider trading There are numerous ethical implications associated with insider trading. First, insider trading practices are perceived as a potential distortion of stock markets. Investor confidence and trust is one of the most crucial elements in determining the long-term sustainability of any economy (Brenkert & Beauchamp, 2009).
This is because to ensures the continuous flow of investment capital by members of the community. On the contrary, insider trading serves the ultimate purpose of compromising the confidence of the investors by risking risk price impacts on their stock. Based on this reasoning, insider is a contradiction to the policies protecting small scale investments through securities in our nation. It is worth noting that insiders and any other third parties involved are usually influential members to the company or in the community, leaving small scale investors vulnerable.
On the other hand, insider trading is termed illegal if the transaction is based on information that is not accessible to public. Indeed, it is not only illegal to trade one’s company in the stock market based on non-public information but even to give another person the information enabling them to trade their stock (Miller & Jentz, 2009). This paper seeks to identify the ethical and legal aspects of insider trading practices in the business world.
In particular, the author gives an argument is support of the claim that imposing measures to control insider trading is crucial in protecting the economic interest of public investors. Definition of insider trading Insider trading is defined as the act of trading the securities (stock or bonds) of a corporation by members with reliable access to non-public information on the given organization (Miller & Jentz, 2009). Such individual might include but not limited to employees, directors, and major shareholders in the company as well as other officers.
The practice of insider trading is termed as non-illegal if the transactions are not executed based on the individual’s knowledge to non-public information about the company (Miller & Jentz, 2009). Nevertheless, the term commonly refers to actions in which the parties involve engage in breach of trust and confidentiality of non-public information. As an example, insider trading can involve trading of stock based on information such as profit results or takeover of an organization before such information is made public (Miller & Jentz, 2009).
Another example is were an individual, having prior information of a large order in the stock, trades on such before the order is executed leading to a potential price impact. Ethics governing insider trading There are numerous ethical implications associated with insider trading. First, insider trading practices are perceived as a potential distortion of stock markets. Investor confidence and trust is one of the most crucial elements in determining the long-term sustainability of any economy (Brenkert & Beauchamp, 2009).
This is because to ensures the continuous flow of investment capital by members of the community. On the contrary, insider trading serves the ultimate purpose of compromising the confidence of the investors by risking risk price impacts on their stock. Based on this reasoning, insider is a contradiction to the policies protecting small scale investments through securities in our nation. It is worth noting that insiders and any other third parties involved are usually influential members to the company or in the community, leaving small scale investors vulnerable.
Source: law aspect
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