Insider Trading Victimless Crime

1415 Words3 Pages

According to Stephen Sibold (2003), he stated that illegal insider trading is not a victimless crime because investors who unknowingly traded with those people who has the inside information loss due to unequal and unfair connection. He also mentioned that illegal insider trading would lead to a loss of liquidity if international capital flows avoid them (Sibold, 2003). Whereas David Gleason (2013) said that insider, trading is a crime without the victim because it does not cause the classes of assessable losses to identify victims that conventional fraud causes. Therefore, insider trading may not impose a direct financial smash; it does directly affect investor’s trust, which is an essential element of an efficient capital market structure. …show more content…

He also mentioned that if it is continues to happen the markets reputation will go down and investors will loss there hope in market. The view of insider trading as a victimless crime ignores the fact that in an insider trading transaction there is a party who loses value from the securities involved or is forced to take a loss. Perhaps it might be more accurate to say that insider trading is a crime with an unknowing victim.In general, however, the way of "insider trading" would not be a criminal offense, because it is impossible to define the concept in a way that would not block rightful provisional research and trading. In practice, these laws give the government a very dull association with which to knock down any profitable firm it wishes whereas Elaine Sternberg (2000) he wrote that unethical insider trading is not a victimless crime. He also stated that insider trading makes it very clear who the victims of unethical insider trading are shareholders because their corporate information has been misappropriated. Therefore, the main victim of unethical insider trading is the shareholder of the company …show more content…

He also mentioned that through his research he found out that insider trading law is associated with a lower ownership concentration at the firm level. Insider trading also affects the corporate governance. Furthermore, the insider trading law is optimistic related to market liquidity might help address rival claims about the effect of insider trading on overall market efficiency and in particular on market liquidity. Therefore, insider trading is inefficient and harmful to equity markets and must to be subject to government regulation. Some commentators argue that insider trading is indeed harmful and therefore that (some forms of it) ought to be prohibited through regulation. Others, however, argue that insider trading is not efficient but rather, on the opposite, is efficient and therefore prohibiting it does not make logic whereas Carlton and Fischel argues about the government regulators towards insider trading on the ground that firms will voluntarily write the optimal level of prohibition into their corporate charters. On the other hand, implicit assumption underlying their argument is that managerial labor markets and capital markets are well functioning and efficient. In distinguish; market theories of insider trading reflect on the larger implications of insider trading to equity markets as a whole. These theories evaluate the effect of insider trading on entire market performance in outcome of measures like liquidity and informational

Show More
Related

  • Insider Trading: The United States V. Newman Case

    1106 Words  | 3 Pages

    The first way the public is affected is through an increase in the wealth gap. Those who are placed high on position of a popular company only get richer with insider trading. It is unfair because the public are missing out on the opportunity to reap the same benefits simply because they do not have the same access. The second way is that the confidence of investors is heavily diminished through insider trading. If a handful of investors are successful in the stock market because of the information they obtain, it leaves space for foul play to be assumed. Other investors in the market can accuse the whole thing of not being fair, and that is exactly what the Government is trying to avoid with the laws they have passed to restrict the unfairness in the stock

    Read More

  • Computer Fraud And Abuse Act (CFAA) Of 1986

    1015 Words  | 3 Pages

    The Sarbanes-Oxley Act was drafted to encourage and protect whistleblowers from retaliation after the fraud scandal that cause the collapse of Enron in 2001. In a 2010 Senate Report found that “external auditors detected only 4.1 percent of uncovered fraud schemes, “whistleblower tips detected 54.1% of uncovered fraud schemes in public companies” and were thirteen times more effective than external audits” (Turpan, 2016). Whistleblowers serve an important service to the public and are more effective than external audits. The CFAA has been used to by employers to retaliate against employees who act as informants for agencies like Internal Revenue Service or Security Exchange Commission to expose fraud. There employees, not to their financial gain, gather information as evidence of fraud by the company. With a broad interpretation of CFAA, the employee would "exceed their authority" and was "unauthorized" to access the information, therefore allowing the company to hide their illegal

    Read More

  • Martha Stewart Case

    973 Words  | 2 Pages

    In other words, its buying and selling of securities that has obtained non-public material information, and in Martha’s case she was guilty of it. “However in an interesting legal technicality, Martha Stewart did not necessarily breach a fiduciary duty to the other investors, since she had no real obligations to inform other investors, which would be the case if she were an officer with company (US SEC, 2009). This being said, if she confessed her actions were wrong, she would not have been convicted of insider trading. Insider trading can be either legal or illegal due to the nature and the timeframe. This was not the road that Martha Stewart decided to take. ‘She instead chose to collide with her broker in an attempt to barricade a story about how there was a standing order for Ms. Stewart to sell her shares” (US SEC, 2009). Martha Stewart had knowledge on the ethics surrounding trading of stock having already been a CEO, she should have known what she was doing, but one can argue that due to her crazy work life, she simply did no think about it. It shows that she is not engaging in illegal behavior. “Martha Stewart displayed her morality lies when lying to the US authorities even thought this was obviously illegal and unethical; her action can also be analyzed through egoism philosophy where right or acceptable behavior defined in terms of consequences to the individual, regarding maximizing self0interest” (Carr, 2002). Martha Stewart thought she did everything right, but still did not bother to warn the shareholders. If insider trading had not taken place, it would be less of a crime, but her actions indicated unethical behavior and define lack of integrity, and lying to Federal investigators only made it

    Read More

  • Film Analysis Of The Untouchables

    878 Words  | 2 Pages

    In 2008 the worst financial crisis since the great depression hit and left many people wondering who should be responsible. Many Americans supported the prosecution of Wall Street. To this day there have still not been any arrests of any executive on Wall Street for the financial collapse. Many analysts point out that greed of executives was one of the many factors in the crisis. I will talk about subprime loans, ill-intent, punishments, and white collar crime.

    Read More

  • Rogue Bank Case Study

    1362 Words  | 3 Pages

    Svoboda and Robles both broke the misappropriation and tripper (tippee) theory. In Bailey article, he mentions that the misappropriation theory requires courts to focus on whether a fiduciary relationship, or similar relationship with a "duty of trust or confidence," exists (2010, p.541), and tripper theory obtains an individual who received confidential information from the insider individual. Svoboda and Robles violated the fiduciary duties which are the duty of loyalty and care. When Svoboda brought in an outsider, Alena, to complete the task, he broke the duty of loyalty and care toward his company, but then was disloyal to Robles when Svoboda prepared his own trade security. Under Section 10b and rule 10b-5, if an individual using confidential information and then assist another individual, the individual is liable for the trading of the confidential information if they are aware of the fiduciary duties. As a tippee, Robles was liable for trade securities because he was aware of the policy of the Rogue Bank. Bailey (2010) provides an example regard to the SEC v. Texas Gulph Sulfur, when the Second Circuit held that an investor is prohibited from using non-public information to his advantage, regardless of how the investor received the information and the explanation for this situation was to ensure all investors were provided with equal

    Read More

  • Disclosure of Executive Health Information: Balancing Investor Rights and Executive Privacy

    1796 Words  | 4 Pages

    Though the Securities and Exchange Commission rules governing selective disclosure and insider trading contain no provisions relating specifically to the health of executives, publicly traded companies must nonetheless manage the potential implications of their key executives’ health on perceptions of the company’s future success as well as their propriety in disclosing information material to investors. This can be a difficult task, as an employer disclosing particulars about an employee’s health seems to run contrary to the special privacy protections given health information in the U.S., yet such information can undeniably affect investors’ decisions. Recently, the Securities and Exchange Commission launched a probe to evaluate statements made by Apple, Inc. regarding the health of CEO Steve Jobs. While not yet a formal investigation, this unprecedented evaluation of health-related disclosures raises significant issues about how such information should be treated and how the rights of investors are to be weighed against the rights of executives. Additionally, if this practice becomes regular, it could lead to unfair and burdensome erosions of executives’ rights to privacy and medical autonomy.

    Read More

  • Jordan Belfort Research Paper

    562 Words  | 2 Pages

    Jordan Belfort is famous for his crooked way of earning his millions as a stockbroker on Wall Street. Even Belfort started at the bottom, on his first day in Wall Street he was told he was “lower than pond scum”(Belfort 1). After writing a book about his happenings on Wall Street, we’ve seen the

    Read More

  • Jordan Belfort Case Study

    3181 Words  | 7 Pages

    The stock market is an enigma to the average individual, as they cannot fathom or predict what the stock market will do. Due to this lack of knowledge, investors typically rely on a knowledgeable individual who inspires the confidence that they can turn their investments into a profit. This trust allowed Jordan Belfort to convince individuals to buy inferior stocks with the belief that they were going to make a fortune, all while he became wealthy instead. Jordan Belfort, the self-titled “Wolf of Wall Street”, at the helm of Stratton Oakmont was investigated and subsequently indicted with twenty-two counts of securities fraud, stock manipulation, money laundering and obstruction of justice. He went to prison at the age of 36 for defrauding an estimated 100 million dollars from investors through his company (Belfort, 2009). Analyzing his history of offences, how individual and environmental factors influenced his decision-making, and why he desisted from crime following his prison sentence can be explained through rational choice theory.

    Read More

  • Martha Stewart Insider Trading Case

    1687 Words  | 4 Pages

    The Martha Stewart insider trading case was a high profile case filled with uncertainty. In order to say whether or not Stewart handled her indictment responsibly, it is necessary to start with an assumption regarding her guilt or innocence. For the purposes of this paper, based on the information I have read about the case, and based on the fact that she was found guilty of all counts (although not all specifications) in her stock conspiracy trial (with the exception of the security fraud charge which was thrown out), I will assume that she is guilty. (courttv.com) Based on that assumption, there are several reasons that Martha Stewart did not handle her indictment responsibly which can be summarized in a recap of the charges: she lied about receiving illegal information leading her to sell her stock, she lied about having a prearranged agreement to sell her stock when it fell below $60 per share, she tried to hamper the investigation by providing false information, and she worked with her broker to obstruct justice and make false statements regarding the scandal. (chicagotribune.com) As the CEO of Martha Stewart Living Omnimedia (MSLO) and as a successful businesswoman motivated to protect her own personal interests, it might be easy to understand the temptation behind her decisions, but the discussion here will be based on whether or not her decisions were responsible.

    Read More

  • There are no Truly Victimless Crimes

    1033 Words  | 3 Pages

    A man chooses to take cocaine. He understands the risks he is taking, and he believes that taking the cocaine is worth the risk. Should he be allowed to take the drug? Or should the government force him to abstain from it, in his own interest? He is not hurting anyone but himself, so why should there be a law against it? This debate has raged since the beginning of civilization. J. S. Mill, in his Essay on Liberty, takes the position that is commonly accepted: the government should not interfere with matters that do not involve more than one person. These matters are often called "victimless crimes." Mill - along with the majority of people in today's world - claims that if a person commits a crime against his or herself, such as harming the body by taking certain drugs or suicide, the person should not be prosecuted. The argument is that no other person is affected. All involved parties consent to the arrangement, so they should be responsible for whatever happens. A few common victimless crimes are prostitution, taking harmful drugs, and suicide. These are perceived as having no negative effect on anyone but the people who agreed to accept the negative effects. In reality, all victimless crimes cause problems for other members of society. J. S. Mill did not understand that "victimless" crimes do not actually exist.

    Read More

  • The Efficient Market Hypothesis

    774 Words  | 2 Pages

    ... the public and private sector. It uses both the weak form and semi strong from to make decisions. When an investor is given both public and private information the investor would not be able to profit about the average investor even if he was provided with new information at any given time. These investors are given name such as insiders, exchange specialist, analyst and money mangers. Insiders are senior managers that have access to inside information of that company. The security exchange commission prohibits that allow of inside information use to achieve abnormal returns on investments. An exchange specialist can achieve above average returns with specific order information on a specific equity. Analysts can analyze whether an analyst opinion can help an investor achieve above average returns. Institutional money mangers work handle mutual funds and pensions.

    Read More

  • Martha Stewart Case Study Summary

    1007 Words  | 3 Pages

    This case study is not about Ms. Stewart direct participation with illegal insider trading as the media had steered the public to believe. To begin, Ms. Stewart received a phone call from Ann Armstrong, her assistant, stating that Peter Bacanovic, her stockbroker, “thinks ImClone is going to start trading down.” (Arnold, Beauchamp, Bowie, 2013, p. 390) Although Ms. Stewart was not able to get a hold of Peter, she talked to his assistance, Douglas Faneuil,

    Read More

  • Insider trading

    614 Words  | 2 Pages

    First to be discussed is a concrete definition of “insider trading” as it is discussed in this essay. According to the “European Communities 1989 Insider Dealing Directive: insider trading is the dealing on the basis of materials unpublished, price-sensitive information possessed as a result of one’s employment.(Insider Trading)”

    Read More

  • The Wolf of Wall Street

    1300 Words  | 3 Pages

    Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.

    Read More

  • Different Types of Espionage

    2469 Words  | 5 Pages

    This acquisition of confidential or proprietary information undercuts profit potential, market share, undermine negotiations, or may even cause bankruptcy of the targeted company.4 The perpetrators of industrial espionage usually involves the employees, contractors or foreign intelligence. For example, a perpetrating company may pay (or bribe) the employees of the target company in exchange of confidential documents. There are also freelance employees who steal documents and files and sell it to anyone who may think of the i...

    Read More

More about Insider Trading Victimless Crime

Open Document