Legality And The Morality Of Insider Trading Finance Essay - Free Essay Example

Sample details Pages: 6 Words: 1841 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Is insider trading ethical? Is insider trading illegal? Insider Trading phenomena is controversial and is bringing a lot of discussion around itself. Some of the opponents claim that its both not ethical and legal to use information, which is not putted into public knowledge, while other opponents argue that insider trading increases market efficiency and does not any hurt to anybody. During this paper I will try to bring topic closer to the reader by providing the reasoning of both parties involved in discussion. What Insider Trading states for? Who is an insider trader? It is hard to define insider trading due to complexity of the topic, however the most common definition stands for: Insider trading is illegal when transactions like buying or selling stocks, bounds or other securities are based on information that is not available to the general public. In other words, the inside information which is used by inside traders to influence their decisions before publishing this information to public knowledge, thus giving them an edge in making the best deals, whether to buy or to sell. This competitive advantage according to the law is illegal and according to some scholar it unethical. Insider informer can take any forms. One can be a member of a company and has stock in the company, and finds out that your company is going publicly bankrupt the next day. Or, quite the opposite, if a business was to be buying out a major competitor, knowing that information before it was publicly announced would also be insider information. Paying someone to be a n informant from a company is also considered as insider information and again is illegal. Insider traders are usually defined as companys officers, directors and any beneficial owners of more than ten percent of the companys equity securities. However, American law is not limiting anti insider trading law only to these people. In the understanding of this law, any person who trades shares based on material non-public information in violation of some duty of trust. This duty may be imputed; for example, in many jurisdictions, in cases of where a corporate insider tips a friend about non-public information likely to have an effect on the companys share price, the duty the corporate insider owes the company is now imputed to the friend and the friend violates a duty to the company if he or she trades on the basis of this information. Don’t waste time! Our writers will create an original "Legality And The Morality Of Insider Trading Finance Essay" essay for you Create order Insider trading legal aspects. Insider trading was not always illegal. First regulation in the USA appeared only in 1929 when the USA Congress passed the laws limiting insider-trading acts, and created the Securities and Exchange Commission to enhance market oversight. Since that time much of the development of insider trading law has resulted from court decisions. Nevertheless there is still a legal dilemma about insider trading as for example: the law prohibits these insiders from trading on this information until the information is made public. But even then the definition of what is made public may not be what one thinks. Lets assume that a person working for a company on a proposed merger with another company happens to mention it to a friend who works for a newspaper or news broadcaster who then publishes the information. Has it then become public such that everyone is now free to trade in the securities? No. There are also strict interpretations on this subject. The information has become public when the company officially publishes the information by filing it officially with the appropriate authorities, meaning the Ministry of Finance. The other alternative is for the company, itself, to arrange its publication in two public media such as newspapers, TV broadcasts, etc. Even then, individual has to wait until 12 hours after it is made public. America has been a pioneer in criminalizing insider trading, but nowadays regulations, which prohibit this phenomenon, are present in law legislation in most of the countries all over the word. As example: In the UK, the relevant laws are the Criminal Justice Act 1993 Part V Schedule 1 and the Financial Services and Markets Act 2000, which defines an offence of Market Abuse.  [1]  Just like in American law, it is also illegal to fail to trade based on inside information. The principle is that it is illegal to trade on the basis of market-sensitive information that is not generally known. No relationship to the issuer of the security is required; all that is required is that the guilty party traded (or caused trading) whilst having inside information.  [2]  In comparison in Japan first law against insider trading appeared in 1988 but even now as Roderick Seeman claims that: many Japanese do not understand why this is illegal. Indeed, previously it was regarded as common sense to make a profit from your knowledge.  [3] Insider trading Ethical Dilemma. Even with existing laws and regulations, ethical dilemmas still exist and the laws are sometimes vague. When we analyze insider-trading phenomena, we can ask ourselves the question what is wrong in taking good luck and opportunity to advance in business and profit? I would answer NOTHING, except the fact that it is an illegal act. That is why some economists and authorized scholars, like Henry Manne, Milton Friedman, Thomas Sowell, Daniel Fischel, Frank H. Easterbrook argues that laws, which makes insider trading illegal should be cancelled.  [4]  They claim that insider trading based on non-public information benefits investors, as well, by more quickly introducing new information into the market and in this way speeds up market efficiency, which is a benefit for all parties. Moreover according to some economist such control over the stock market is too much government regulation in the stock market, and in same way is harmful to capitalism. Henry Mann, argues that the legi slation has not stopped insider trading from happening, and that legalizing it is a sensible solution to the improper regulation that ultimately hurts the market. He also claims that if insider trading is allowed, it will allow stocks to show its actual worth, rather than have the price tempered by waiting for the information to go public.  Ã‚  [5]  Another great economist Milton Friedman, laureate of the Nobel Memorial Prize in Economics, said: You want more insider trading, not less. You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that. Friedman did not believe that the trader should be required to make his trade known to the public, because the buying or selling pressure itself is information for the market.  [6] This brings me to another critical issue. Does the fact of possessing information bring necessary any value? No, because to act on any piece of information requires interpr etation of that information, which in turn requires a large number of other pieces of information. Lets imagine that for example Apple announced that that its Q4 profits have raised by 45 percent. This doesnt really tell anyone how to perform it in the market for Apple securities, whether to buy or sell. This requires additional general knowledge about IT market, the profits of other IT companies and Apple main competitors future actions plan and so on. Only if we add to the Apple announcement information about Microsofts profits, which let says, could have raised by 100 percent, we can draw father conclusions. So any single piece of information about a company, however critical it may be to that company and its future, does not in itself provide clear instruction to the investor. Action requires interpretation, which requires wider knowledge. Many market theorists have argued, that insider trading enhances market efficiency, smoothes price volatility and reduces the likelihood o f price shocks arising from unexpected events.  [7]  On the other hand, when we think about illegal aspect of these phenomena it is hard to not agree that providing information which are not public to the everyone knowledge introduce the problem of the fairness. Fairness which in these case would hold that in a fair market, all parties have equal access to information relevant to asset valuation, but entitled to nothing more.  [8]  So in this situation insider trading is perceived as an unfair act, it causes some injury to specific traders or potential traders, or because it causes investors as a whole to lose confidence in the securities markets. To illustrate, assume that insiders are aware of negative information regarding Alpha Corporation that, if disclosed, would cause the current per share market price of Alpha stock to drop from $25 per share to $20 per share. Prior to public release of the information, Alpha insiders sell Alpha stock on the basis of this negative in formation, reducing Alphas price to $23 per share. Some outsiders will undoubtedly sell at $23 and could thus legitimately claim to be $2 per share poorer than they would have been absent insider trading. A corresponding number of investors, however, will purchase at the more correct price of $23 per share, making them better off than they would have been in the absence of insider trading. Although the $23 per share price is higher than the $20 per share price that would have prevailed if the insiders had been forced to reveal their secret information prior to trading, this harm is attributable to the lack of a general duty to disclose material non-public information under the federal securities laws and not to insider trading.  Ã‚  [9] This example touches another critical issue in the insider trading discussion like stock price manipulation phenomena. We can imagine the situation where insider traders manipulate investors by releasing fails information about company in o rder to move market prices away from their fair values and take financial benefit from it. As the last, insider trading also violates the duty of trust or confidentiality that one individual or business entity owes to another. This causes loss in confidence in the securities markets. People fear that insider traders regularly take benefit at their expense, which lead to decrease people in willingness to invest. In this case raising new capital would be more costly for companies whose securities were harmed by insider trading. Hence, all else being equal, insider trading makes it harder for companies to raise money when opportunities to undertake new projects arise. Conclusion For sure there are no clear and easy answers to the question of regulating insider trading. Insider trading may have benefits for both the company and the capital market under certain conditions. As was presented above insider trading can positively influence the market effectivness Henry Manne Insider Trading and the Stock Market. However, the arguments against regulation show a certain ambiguity and doubts of regulators are proven. Even though scholars often argue that fairness considerations do not carry much weight, the personal feelings of the individual investor and his confidence in the integrity of securities markets must be taken into account. Although insider trading can have positive effects for the firm and its wealth, as the arguments of deregulators show, it also bears several severe risks. The costs seem to outweigh the benefits.  [10]  Therefore, it is correct to prohibit insider trading by a mandatory regulation.

EST1 Task 2 Ethics - 1694 Words

I and two other individuals have agreed to start a business that will provide management consulting services to nonprofit organizations. Because of the increased scrutiny on actions of corporations and those who act on behalf of organizations, we have determined that it would be essential to have our ethics program developed before we start offering our services. A business as a moral agent must prove that it has an effective ethics program to protect employees, the corporation, and businesses that the company will serve. It is also important to have an ethics program to support the ethical values of our corporation and to make it clear to employees what is acceptable behavior, and to make clear what policies and standards are to be†¦show more content†¦The MCS individual will be given 30 days to complete the online training to be completed each year no later than 30 days after the date of hire, i.e. date of hire 06/10/2011, a particular employee would have until 07/10 of every year after their employment date to take the yearly online ethics training and have their completion page signed and sent in to the HR Ethics Manager. The PC online training would encompass four specific areas: Enforcement of company rules. Code of Conduct. OSHA. Ethical behavior toward peers in the company. Workplace Diversity. Discrimination in the Workplace. Harassment Training. Ethical behavior of consultants toward clients. Clients. Fees. Engagements. Profession. Ethical behavior regarding the environment in relation to company property and liability issues. C. Monitoring, Auditing, and Reporting Ethics Violations: The Board of Directors would be in charge of the Code of Ethics for our company and subject to its rules and regulations. We three would be the committee and I am the Ethics manager and officer. Any and all concerns should be turned in via the online program for anonymous purposes and be directly handled by our committee. The employee and all personnel for our company may still contact the Ethics Officer personally if that is the more comfortable way to deliver the ethics concerns and perceived violations. The Ethics committee would be responsible for developing and interpreting policies andShow MoreRelatedEst1 Task21159 Words   |  5 PagesWGU EST1 Task 2 Company X Ethics Program Standards and Procedures: Company X expects all employees to conduct themselves with integrity, professional and responsible actions at all times. An employee’s actions in both personal life and professional life should avoid any situations that (A) could be construed as harmful to the company or its employees or (B) cause negative public reactions that could impact Company X customers or customer relations in adverse ways. You are a Company X representativeRead MoreAssignment Questions On Ethical Situations2379 Words   |  10 Pages John Rolph EST1: Ethical Situations in Business Task 2 Standards and Procedures 1.) Information Confidentiality: As an employee, you will be exposed to client-sensitive as well as company-sensitive information that is to be viewed only by those who have the authority or permission to do so. Such information to be considered â€Å"confidential† includes business contracts, financial information, internal correspondence, and any and all documentation (electronic or paper-based) that is not authorizedRead MoreTask 2: Est1 Essay example2372 Words   |  10 PagesJohn Rolph EST1: Ethical Situations in Business Task 2 Standards and Procedures 1.) Information Confidentiality: As an employee, you will be exposed to client-sensitive as well as company-sensitive information that is to be viewed only by those who have the authority or permission to do so. Such information to be considered â€Å"confidential† includes business contracts, financial information, internal correspondence, and any and all documentation (electronic or paper-based) that is not authorized

How Important Is the Character of Alfieri to the Play as a Whole free essay sample

How is the Character of Alfieri important to the play as a whole? The character of Alfieri appears at the very beginning of the play being the first character the audience is introduced to. As the narrator of the play, Alfieri introduces the audience to himself, the other characters and also, within his opening speech, links to many ideas which foreshadow the events throughout the play. Alfieri as the narrator of the play could also be linked to the chorus within the Greek tragedy play structure. Through this he stands apart from the drama that engulfs the other characters and is a trustworthy observer as he comments on what is happening with the other characters. By talking directly to the audience he gives an insight to the other characters from his view, ‘This ones name was Eddie Carbone, a longshoreman†¦Ã¢â‚¬â„¢ ultimately allowing the audience to gain a quicker view of the characters. We will write a custom essay sample on How Important Is the Character of Alfieri to the Play as a Whole? or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Throughout the play the audience can see that Alfieri does not want anything from anyone else in the story, only getting involved to help and give advice to those such as Eddie and Marco. This is showing the importance of being a detached observer but also part of the community. The details the audience learns about Alfieri in his opening speech, ‘I am a lawyer. ’ are not to present his personal character to the audience but to give the setting of the play and his important position within it in relation to the other characters. Through Alfieri’s opening speech the audience becomes aware of his profession as a lawyer but also that between him and the rest of the community there lies ‘years of distrust. This may be due to the fact he is a higher rank to them with his wife and friends telling him that the people he works for ‘lack elegance, glamour. ’ However, the relationship Eddie has with Alfieri goes beyond the lawyer/client relationship. This suggests the fact that even though Alfieri told Eddie there was ‘no recourse in law’ he could use to stop Catherine marrying Rodolfo, Eddie still went back to him a second ti me. Alfieri seems to be the one person Eddie can share his emotional feelings with, ‘and he puts his hands on her like a goddamn thief! In this way Alfieri links to the idea of a priest. This being because of the fact that Eddie feels as if he can go to him for moral advice as well as legal advice. Thus making him an important character for the audience to use to see Eddies true emotions. Whenever Alfieri speaks directly to the audience he uses the past tense, linking back to the events that happened. He seems to foreshadow much of what happened in the play allowing the audience to believe the fact that this play is a tragedy, ‘I watched it run its bloody course. Through the use of foreshadowing, Alfieri created the feeling of timelessness especially when referring to the themes of justice straight away, ‘justice is very important here’ linking this to Eddie. He also subtly foreshadows to the audience what justice means to people like Marco stating ‘no w we settle for half’ implying that whatever justice means for the Americans it means more to the Italians, linking to Marcos thirst for revenge and the lead up to eddies tragic death at the end of the play. In conclusion, it is Alfieri who right from the first encounter with Eddie foresaw the tragic end to Eddie, which he was ‘powerless’ to prevent, despite his best efforts in telling Eddie that there ‘is nothing you can do. ’ Also with Alfieri identifying Eddie as the hero in this particular tragedy and the audiences’ view of Eddie being the villain, it creates an important comparison of how the characters are viewed. Some can also argue that it was Alfieri who suggested the idea that lead to Eddies downfall, ‘the manner in which they entered the country. But I don’t think you want to do anything about that, do you? ’ Through this and also the way his role as a narrator helps him achieve the exploration of more universal and timeless themes is Alfieri a very important and needed character in A View from the Bridge.

Love Is Only a Feeling free essay sample

Despite a few floppy tracks, â€Å"Love Is Only a Feeling† (song) is a stupendous song with incredible lyrical choice.As Joey is explaining in the intro how this female makes him happy, he goes on about their future together and the things they will/can share: Look, I love her curves but what’s more Preferred Is the way she articulates words Can’t help observe and stare When she in the mirror Masking the massacre while she fixing her hair Possibly referring to the pain in her life, this woman uses makeup to distract herself from the fact that she is in pain. Strictly speaking, joey can’t keep his eyes off her as she is covering the â€Å"massacre† on her face. Joey appreciates her independence as a woman, although she is wrapped up in the idea of being alone and not needing any man, Joey would love to be hers: I wanna see you shine like the gem that you are Want you be so secure that they can see from afar That you don’t need another man It’s a beautiful emphasis that acknowledges the aspects that make her, her. We will write a custom essay sample on Love Is Only a Feeling or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Joey wants to exemplify his relationship with this woman, he is so enthralled that he can’t help but to get thrilled with the thought of having a future with her. As he looks at her he sees how much of a real mature relationship they have, to him it’s perfect and wishes to hold onto it forever: You’re the only reason i be, staying here Wanna paint a picture, let’s make it clear The future so bright baby, race you there To him, â€Å"painting a picture† is a visual to what he wants forever but his word choice in the chorus can be slightly confusing: Love is only a feeling Love is only a feeling Love is only a feeling Love is only a feeling The fact that the whole song is talking about romance, the chorus contradicts the versus saying â€Å"love is only a feeling† because it suggests this love he has or wishes to have will disappear someday because although he wishes to have a future with this woman, love is only a feeling to him. Furthermore, it can also be more of a fear; a fear to accept love because once it is accepted you become vulnerable and â€Å"unprotected† which gives them the power to hurt you. Sincerely for Joey, Love is Only A Feeling.