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Insider Trading Essay

1113 words - 4 pages

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 stockbrokers are not as in demand for their services as they once were which is why Charles Schwab investment firm has laid off more then 1800 workers in this past month, which amounts to a 10 percent reduction in the work force. There are certain limitations on stocks before they can be traded and listed on the stock market. The New York Stock Exchange (NYSE) the largest in the United States was founded in 1970 and handles over 70% of all trades. Then there is the National Association of Securities Dealers Automated Quotations (NASDAQ) which is the fifth largest stock trade in the world. On the stock market there are a lot of illegal things that go on that are unethical. The most known crime that goes on is insider trading scandals. The way insider trading occurs is when one person or many people have information on a company that the rest of the public doesn’t know of and use it to make a profit on the stock market. This trading in the United States has been illegal since 1934 and is protected by the Securities and Exchange Commission (SEC). This requires all companies to disclose statements to the public before offering any securities on the public market. The SEC views insider trading unfair to the investors. The SEC also regulates stock exchanges, brokers, and dealers in securities, and also sets the margins for bank credit in security trading. So basically the law prohibits “insider trading”, the way insider trading happens is when corporate directors and officers find out information on their company because of the position they hold before anybody else does is known as inside information. This information can and probably does have an impact on the company’s future on the market of value. So it is obvious that their position in the company gives them an edge over the public and other shareholders. 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...

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