Insider Trading - Raj Rajaratnam Case

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Insider Trading - Raj Rajaratnam Case

Starting as early as the 17th century, insider trading was being used in the European Stock Exchange. (5) This was a place where the government could buy or sell off a security such as a bond. (3) In 1789, William Duer was appointed as Assistant Secretary under the first Secretary of Treasury, Alexander Hamilton. William was the first individual to use the information he gained from working as assistant secretary to become the first inside trader. (5) This also was the start of illegal insider trading and because of this incident, in 1792, the stock market crashed.
According to the United States Securities Exchange Commission (SEC), “Illegal insider trading refers to the buying or selling of security, in breach of a fiduciary duty or other relationships of trust and confidence, while in possession of material, nonpublic information about the security.” (2) There are various examples of illegal insider trading cases. When corporate officers, directors, and employees of law, banking, and printing find confidential information about the development of the business and trade its corporation’s securities, it is consider a crime. When people take advantage of the information given to them, they take advantage of their employees, which can possibly lead to termination.
Insider trading occurs in many countries, but the consequences for the illegal act may vary between all countries. In Norway, Alain Angelil was convicted in a district court on December 9, 2011 with the longest sentence in Norwegian history, which was 8 years. (36) (37) In the United Kingdom, its regulators have a difficult time prosecuting those of committing the illegal act. They mainly rely on the series of fines given to tr...

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... Rajaratnam hedge-fund Galleon Group. The group had over $1.5 billion dollars invested with many Sri Lankan companies (Ondaatjie, 2009). Once Rajaratnam was indicted many investors decided to pull their funds out of Galleon Group. This created chain reactions that led to all investors pulling their money from the hedge fund. Millions had to be removed from Sri Lanka to pay back its investors. This left many Sri Lankan companies with little cash on hand to continue operation and expansions.
Unfortunately insider trading will continue to be a widespread crime on Wall Street until tougher laws are enacted. Raj Rajaratnam was turned into an example of what could happen if an individual commits securities fraud. Nevertheless, with the allure of the large amount of money made available from insider trading we will not see this crime slowing down anytime soon.

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