• What is Insider trading?
• · Insider trading” is the purchase or sale of securities by someone who has material information that is not publicly available.
• · Insider trading is the practice of disclosing information about a securities transaction to a small group of people. Vital information is typically shared with a small group of people within the company (insiders), who then share it with a smaller group of people outside the company. Insider trading gives people an unfair advantage by allowing them to profit from confidential information
• · Trading in a company’s stocks by employees or anyone with access to material non-public information that could affect the value of those securities is considered insider trading.
• Why should it be avoided?
• it prioritizes the interests of the insider over those to whom they have a fiduciary duty.
• it enables insiders to artificially manipulate stock prices and portray their companies falsely on a worldwide scale.
• Insider trading also harms investors who do not have access to non-public information because their stocks do not receive their full value. If information that wasn’t accessible to the public was widely known before insider trading happened, the markets would use that information to price securities correctly.
• Consider, for instance, insiders who purchase their own company’s shares when they are privy to positive information that, once made public, is likely to push up the price of those shares. Managers that engage in this form of trading activity usurp gains that would have accrued to the company’s shareholders in the absence of their involvement. When the study focuses on evaluating whether this or that shareholder is going to win or lose, the moral problem at stake is obscured. What matters is that insider traders as collective appropriate earnings that would have gone to other shareholders as a group, past and present, if not for their behavior.
• It’s unethical and prevents regular people from taking part in the market, which makes it harder for businesses to acquire funding.
• It erodes trust in the financial system and adds to the general feeling that the deck is stacked against regular people.
Was Martha Stewart engaged in insider trading, and was her action or decision intelligent?
Martha Stewart was acting on nonpublic material information via information she received from her broker,
True, Martha Stewart did play a part. When she learned that the founder and CEO of ImClone (who was also a client of Bacanovic’s) was trying to unload all of his stock, she sold 3.928 shares (representing around 0.03% of her assets). From this trade, she netted almost $228,000. Her behavior was irrational.
• She should have known the risks of insider trading better than the others involved because of her background in the securities industry. Secondly, despite Martha What is Insider Trading?
• Insider trading is when someone with important information that is not available to the public buys or sells securities.
• Insider trading is the practice of disclosing information about a securities transaction to a small group of people. Vital information is typically shared with a small group of people within the company (insiders), who then share it with a smaller group of people outside the company. Insider trading gives people an unfair advantage by allowing them to profit from confidential information
• Trading in a company’s stocks by employees or anyone with access to material non-public information that could affect the value of those securities is considered insider trading.
TO BE CONTINUED…..
