KPMG
Ethical Issues Relating to Insider Trading
The recent news has sparked debate on whether KPMG will be another Arthur Andersen facing its recent insider trading issue. The ex-partner of KPMG, Scott London, revealed client’s confidential information to the third party in exchange for both cash and expensive gifts since 2010. For example, the third party gained nearly $200,000 by selling 27,000 shares of RSC Holdings after the announcement of merger because of the material information revealed to him by London.
“As a leader at a major accounting firm, London’s conduct was an egregious violation of his ethical and professional duties” was the comment towards this issue from the director of SEC’s Los Angeles office. Pointed out in the comment, professional accountants are responsible to choose the right alternative facing a white-or-black condition. It is their professional duty to protect the confidential information of their clients. As in the case of insider trading, a collection of an ill-gotten wealth at the expense of betraying the material non-public information of clients is totally unethical for London, a professional accountant to do. And in the certain case of insider trading, both public who is unaware of the secret and the third party should exist. The unfairness from the amount of information possess by both parties is where the argument stands. As stakeholders, the information we share are supposed to be the same once a perfect efficient market reached, which means we allow certain unfairness exists when one knows better than the others in the semi-efficient market nowadays. However it is unethical when the third party fails to conduct his moral obligation by offering benefits to accountants in exchange for confidential information when he knows the behavior is totally wrong.
A renewed utilitarian theory can be introduced into the discussion when it comes to insider trading. In the original form of utilitarian, it may be a chance that insider
The recent news has sparked debate on whether KPMG will be another Arthur Andersen facing its recent insider trading issue. The ex-partner of KPMG, Scott London, revealed client’s confidential information to the third party in exchange for both cash and expensive gifts since 2010. For example, the third party gained nearly $200,000 by selling 27,000 shares of RSC Holdings after the announcement of merger because of the material information revealed to him by London.
“As a leader at a major accounting firm, London’s conduct was an egregious violation of his ethical and professional duties” was the comment towards this issue from the director of SEC’s Los Angeles office. Pointed out in the comment, professional accountants are responsible to choose the right alternative facing a white-or-black condition. It is their professional duty to protect the confidential information of their clients. As in the case of insider trading, a collection of an ill-gotten wealth at the expense of betraying the material non-public information of clients is totally unethical for London, a professional accountant to do. And in the certain case of insider trading, both public who is unaware of the secret and the third party should exist. The unfairness from the amount of information possess by both parties is where the argument stands. As stakeholders, the information we share are supposed to be the same once a perfect efficient market reached, which means we allow certain unfairness exists when one knows better than the others in the semi-efficient market nowadays. However it is unethical when the third party fails to conduct his moral obligation by offering benefits to accountants in exchange for confidential information when he knows the behavior is totally wrong.
A renewed utilitarian theory can be introduced into the discussion when it comes to insider trading. In the original form of utilitarian, it may be a chance that insider
References: Edvard Petterson. (2013). Ex-KPMG Partner London Will Plead Guilty, Lawyer Says. Available: http://www.bloomberg.com/news/2013-04-11/ex-kpmg-partner-london-will-plead-guilty-lawyer-says.html. Last accessed 22nd April 2013. Encyclopedia of Business. (2006). Securities and Exchange Commission.Available: http://www.referenceforbusiness.com/encyclopedia/Res-Sec/Securities-and-Exchange-Commission-U-S.html. Last accessed 22nd April 2013. Robert W. McGee. (2009). Analyzing Insider Trading from the Perspectives of Utilitarian Ethics and Rights Theory. Journal of Business Ethics. 18 (2), p2-4. US. Securities and Exchange Commission. (2013). Insider Trading. Available: http://www.sec.gov/answers/insider.htm. Last accessed 22nd April 2013.