preview

insider trading Essay

Good Essays
Insider Trading


In our economic economy today, we have gotten a few high profile cases were people have tried to make money by using illegal tactics, and these are illegal tactics are based on the insider information. These high profile cases were on Martha Stewart and President George W. Bush. This is why I chose to write my paper on what exactly “Insider Trading” is. Insider trading has to do with stocks, on the stock market. The stock market is basically an organized place where stocks and bonds are traded. The members of this exchange usually buy and sell the stocks for others while charging a commission for doing this work for their clients. Although more and more people are now trading online
…show more content…
It is not always the corporate directors and officers that who find out this information first it can range from the lawyers to the person that prints out the companies’ financial papers. Basically anybody who has knowledge of a companies future weather in being good news or bad, the person can profit from it. This person can often make profits trading stocks by using the inside information he has to guide his decisions on buying or selling of the stock. The rule that stops firms from allowing their insiders to trade is rule 10b-5, which is the SEC’s, law against insider trading. Rule 10b-5 comes from 10-b the 1934 act, which is a provision that allows the SEC to prohibit “any manipulative or deceptive device or contrivance.” This basically means that the federal law does not prohibit insider trading, and the insider trading crime was not defined or expressed in any statues, or rules administered by the SEC. The federal securities law only offers one cure for insider trading and that is an injunction against future violations. Some firms think insider trading should be allowed because if you look at it from a property rights perspective, some firms will be able to reduce the salaries they pay their employees. Although not all firms believe in this thought for it wouldn’t be as compelling for them and it is unlikely to be advantageous for all firms. The trading for insiders would reduce their
Get Access