ipl-logo

Ethical Arguments Surrounding Insider Trading

1517 Words7 Pages

Introduction Insider trading is a term that is teeming with negative connotations and surrounded by controversy. I mean, who can forget the scandal of Martha Stewart the homemaking hoaxer? Insider trading can be legal or illegal depending on the circumstances. However, my focus is not to discuss the legalities of insider trading. My aim in this essay is to define the concept of insider trading, discuss how it is regulated, describe the notion of business ethics, discuss how these principles apply to the concept of insider trading, outline ethical arguments surrounding insider trading and ultimately prove that the offence of insider trading is highly unethical. What is insider trading? According to section 78 of the Financial Markets Act …show more content…

The use of privileged internal information to attain personal gain or to circumvent a loss while disadvantaging other market participants is legally reprehensible. Therefore, it is important that there are regulations in place to ensure that insider trading does not occur, and when it does, that the insiders are appropriately punished for their actions. Another important purpose of insider trading regulations is to enhance investor confidence in South Africa’s financial market and to improve the efficient and effective functioning thereof. The Financial Markets Act (FMA) repealed the Securities Services Act (SSA) and now governs the regulation of market abuse known as insider trading as well as the criminal and civil liabilities associated therewith. The offence of insider trading is outlined in terms of section 78 of the FMA. There are five insider trading offences listed under section 78 of the FMA. First, when the insider dealt in securities for their own account while being in possession of privileged internal information. Second, if the insider dealt in securities on behalf of a third party while being in possession of inside information. Third, if the insider disclosed any of the inside information they were in possession of to a third party. Fourth, if the insider encouraged or discouraged a third party to deal in securities with knowledge of the fact that the trades were based on inside information. Fifth, offenders …show more content…

When insider trading takes place, investors are likely to lose faith in our economy and pull their investments. Loss of foreign investments would negatively affect the entire country, as our economy would suffer significantly. When professionals do not maneuver in the financial markets in a law-abiding way, foreign investors are likely to become uneasy. Corruption will cause foreign investors to lose faith and withdraw their investments from our country, thus preventing much-needed economic growth in South Africa. One of the most important aspects of the corporate sector is that there is a level playing field for all. Insider trading erodes the level playing field. It allows a select few to benefit greatly while others do not. Insider trading allows individuals to take advantage of information that is unavailable to the public to turn a profit. This tactic is not fair to the average investor or shareholder who does not have inside information and uses only publicly available information to make decisions about how to select investments that may be

Show More
Related

  • Barry Minkow: Identify The Affected Party In The Case

    867 Words  | 4 Pages

    Identify the affected party in the case. (internal and external parties and consequences) Internal party Barry Minkow A federal grand jury indicted Minkow and ten other ZZZZ Best insiders on 54 counts of racketeering, securities fraud, money laundering, embezzlement, mail fraud, tax evasion, and bank fraud in January 1988. In his indictment, Minkow is accused of draining his company of assets while bilking banks and investors. Additionally, Minkow has been accused of setting up false companies, writing false invoices, and conducting fake restoration tours.

    Read More

  • Nt1330 Unit 3 Assignment

    334 Words  | 2 Pages

    All, Here are the minutes from today’s meeting: • Currently, IDP can only produce the current day’s metric and trade details and cannot go back in time. Each day the data is refreshed with the most updated trade details (eg. Trade amendments) and the metric is generated using the latest APL and limit letter mapping. To reproduce the metrics and its underlying trades point in time, it will require manual intervention from IDP.

    Read More

  • GERARD Warris Case Study

    1208 Words  | 5 Pages

    WARRENS also made the following made the following false misrepresentation to HOOPER since on or about June 2014 and thereafter, repeatedly, as follows: that "...your investment was in equity voting stock in STEALTH SOFTWARE, L.L.C." In spite of dozens of demands in the two years by HOOPER, no stock or securities reflecting plaintiff 's investment have been made by WARRENS. 75. WARRENS has not made one disclosure, financial or otherwise, required by the Securities Exchange Act or Arizona Security Laws for "accredited" or non accredited investors. HOOPER has requested such disclosures since the date he was hired on July 1, 2013 through the present. HOOPER also requested from WARRENS evidence in the form of stock certificates, evidence indicating he was a registered equity owner in STEALTH SOFTWARE, L.L.C. 76.

    Read More

  • Foreclosure Issues In The CIBC Wood Gundy Case

    824 Words  | 4 Pages

    Regardless, Saturley was well aware of the his positions code of ethics, as well as the seriousness of unauthorized discretionary trading. It turns out that this is not the first time he had been punished for such actions; he had also been reprimanded for discretionary trading in 2004, investigated again in 2007 and had received numerous CIBC bulletins warning against discretionary trading. He had several warnings, and yet continued to perform such

    Read More

  • First Amended Complaint Case Study

    917 Words  | 4 Pages

    I. INTRODUCTION 1. This First Amended Complaint contains causes of action for Federal violations of Sections 20 (b) 20 (d) (1) and 22(a) of the Securities Act of 1933 ("Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77t(b), 77t(d)(1), and 77v(a), and Sections 21(d)(1) 21(d)(3)(A), 21)e), and 27 of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78u(d)(1), 78u(d)(3)(A), and 78u(e), and 78aa. The first cause of action pertains to Defendant, Gerard Warrens, individually. 2. The First Amended Complaint also contains a cause of action for violations of A.R.S. § 44-1801(26) which defines "offers to sell" or "offers for sale" pursuant to A.R.S. § 44-1801(15) and sales as defined pursuant to A.R.S. § 44-1801(21) and A.R.S. § 44-1841 requiring registration of any dealer or salesperson from

    Read More

  • Industrial Recovery Act Research Paper

    207 Words  | 1 Pages

    The Securities Act [1933] and Securities Exchange

    Read More

  • Gilded Age Industrialization And The Panic Of 1873

    671 Words  | 3 Pages

    One example was the Credit Mobilier scandal where major stockholders of the Union Pacific Railroad formed the Credit Mobilier company and sold their shares to influential congressmen. These executives essentially hired themselves and stole taxpayer money, a very lucrative scandal. Scandals like the Credit Mobilier were widespread and executives from many other railroad companies often stole from their own companies. Many executives would manipulate the rail companies' stocks to profit greatly. Executives would often bribe influential politicians, and work together to profit themselves.

    Read More

  • Martha Stewart Case Summary

    899 Words  | 4 Pages

    She claimed that when she called her office to check her messages, Bacanovic had left her a message advising her to sell her stock because the stock had feel below $60 a share and supposedly that was their prior agreement of doing so (Leite, 2012). Stewart claimed that she filed something called a “stop-loss” order, which was meant to say that if the shares had fell below $60, she would pull out of the company. Yet, Stewart’s justification that she gave to investigators about why she sold her shares and the “stop-loss” order did not match the testimony that Bacanovic’s assistant (Donald Faneuil) gave (Leite, 2012). According to the assistant, who personally handled selling Stewart’s shares, he claimed that Bacanovic wanted him to lie about a “stop-loss” order and that he received money bribes for doing so. Now this information was taken with a grain of salt the second time around because initially he lied to investigators about how Stewart did indeed have a “stop-loss” order.

    Read More

  • Andrew Carnegie's Laissez-Faire: Robber Barons

    744 Words  | 3 Pages

    One example of this unethical way of business, was his way of acquiring “Allegheny Steel Company.” The company was beginning to become quite the competitor, using a new method that allowed the efficient, and effective production of steel. The company’s new method was so successful, they were able to undercut Carnegie’s own prices. However, Carnegie began spreading false rumors of the steel being manufactured by Allegheny Steel Company, implying it was ineffective, spreading alarm to their buyers. He was able to hurt their company and take the the reins.

    Read More

  • Persuasive Essay On Whistleblowing

    1089 Words  | 5 Pages

    Whistle-blowing Introduction Whistle-blowing is the act taken by an employee or former employee of disclosing what he believes to be unethical or illegal behaviour taken by his employer. There are two ways in which a person can disclose information. It can be done by internal whistle-blowing or external whistle-blowing. Internal whistle-blowing would be considered when an employee discloses unethical or illegal behaviour to higher management while external whistle-blowing would be when the information was disclosed to the public. The duty to be a whistle-blower over rides the duty that you have to your client or employer.

    Read More

  • Whistleblowing System In The Film Chasing Madoff

    1179 Words  | 5 Pages

    “Chasing Madoff”, a documentary released in 2010 portrays the way the whistleblower, Harry Markopolos, uncovered Bernie Madoff’s fraud scheme and his ten-year struggle to get the SEC to investigate. The documentary begins with an introduction to Harry Markopolos and his former coworkers Frank Casey and Neil Chelo. The three men work in finance, with investment portfolios. They were aware that in the finance industry there was much talk about an investment company making their customers high returns. Casey came across some investment information from a client of Madoff and gives the information to Markopolos to look over.

    Read More

  • Examples Of Unethical Behavior In Business

    1191 Words  | 5 Pages

    A) Introduction Unethical behaviors in business affect everyone since you either work in the field or are a consumer of its services. Unfortunately, almost every company usually has individuals who act unethically whether it is for their personal benefit or for the sake of the company they work for. Unethical behaviors in business might be as simple as using company property or funds for personal gain to inside trading and financial fraud. According to The Chartered Institute of Management Accountants, nearly one third of business professionals feel pressured to compromise their ethical standards and are increasingly pushed towards unethical behavior. Moreover, “misconduct is common and accepted by business services professionals, the integrity of entire economic systems is at risk”, states Jordan A. Thomas, partner and chair of the Whistleblower Representation Practice at Labaton Sucharow law firm.

    Read More

  • Lehman Brothers: Financial Fraud In 2008

    2178 Words  | 9 Pages

    Conclusion After reviewing the information obtained through this report, it highlights the lack of regulation and their accounting practices which took place within Lehman Brothers. The accounting practices that were used within the bank were set by the tone at the top and show that the CFO’s during the 2000’s and going forward had plenty of knowledge of the Repo 105 transactions and had no great will to do anything about. The thinking at the time seemed to be, that the company had used this accounting practice for so long, that if there was something wrong it would have come up by now no point rocking the boat.

    Read More

  • Ethical Issues In Accounting

    1710 Words  | 7 Pages

    Ethical issues in accounting and finance. Summary This task analysis the issue of ethics in accounting and finance as discussed in the International Journal of accounting and finance. Currently, ethics of any firm is an important topic due to the numerous scandals that have taken place in different countries which have resulted in damage to the economy and society.

    Read More

  • Literature Review On Unethical Behavior

    2877 Words  | 12 Pages

    Review of Literature Unethical behavior can tarnish a company’s image and reputation. If a company is unethical, they may have to spend additional money to improve their public image, as well as gain back as many customers as possible. The reason I have chosen to use articles that are quite a few years old and that are not so recent is because I feel that they are very good examples of what I am trying to prove in the terms of ethical behaviour within companies and these specific articles relate well to my chosen topic.

    Read More

More about Ethical Arguments Surrounding Insider Trading

Open Document