Ethics on Insider Trading

Insider trading laws vary significantly from countries to countries. The conduct for the most part associates with illegal conduct. There seems to be general agreement in most countries that the practice is morally wrong.

My opinion on insider trading from ethics of duty approach, also commonly known as deontological ethics, is that the practice is immoral. “Deontic” is defined as “of such ethical concepts as obligation and permissibility” and “designating the branch of logic that deals with the formalisation of these concepts”. This approach is based on the theory proposed by Immanuel Kant, and is referred to as a “non-consequentialist” approach which suggests that the locus of right and wrong of the action is not subject to the outcome of the decision, but instead the principle motivating the decision. London’s actions are in many ways an evident lack of ethics of duty. Ethics of duty suggests that decisions should be made by adhering to a set of rules or by fulfilling the individual’s duties. For Kant, to act out of duty is to act from reverence for the moral law. In this case, London neglected fiduciary duties to the client, public investors and business community at large. Where such duties subsist, it should act as both a moral and legal constrain or barrier to an individual acting in opposition to the interest of the firm. London has also breached the fundamental principles of a professional accountant that is clearly stated in the Professional Code of Ethics developed by the IESBA, explicitly the principles of integrity, objectivity, confidentiality and professional behaviour. He was honoured with the highest of trust by the firm and companies, of which was egregiously violated.

Insider trading is also a clear form of vio...

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... full disclosure on information for all parties for a level playing field. And because gains fall inexplicably and illicitly to the primary stakeholders at the expense of the secondary stakeholders, insider trading is morally unacceptable and hence unethical.

Insider trading carries several civil and criminal penalties, and from the abovementioned rationalisation, is conceived to be unethical and immoral.

Every organisation should mandate confidentiality, and each employee is to be made understood that private information is lifeblood of the company. Access to sensitive information should be restricted and controlled. Insiders or top management level executives with advantaged information should be made to sign a non-disclosure agreement to acknowledge the basic tenet of not sharing information to safeguard integrity and interest of the employee and organisation.