Business Ethics Research Paper Essay Example
Insider Trading
By
Jennifer Miller
Instructor
Margie Andrist
Business Ethics
The purpose of this paper is to review the phenomenon of illegal insider trading in the United States financial securities markets. The analysis section of this paper (a) defines illegal insider trading, (b) explains the enforcement of laws and regulations concerning illegal insider trading, (c) review the pattern of illegal insider trading from 1996 through 2005, and (d) compares the problem of illegal insider trading in the United States with the problem in other countries.
Consider this: "Imagine a boardroom of corporate executives, along with their lawyers, accountants, and investment bankers, plotting to take over a public company. The date is set; an announcement is due within weeks. Meeting adjourned, many of them phone their brokers and load up on the stock of the target company. When the takeover is announced, the share price zooms up and the lucky 'investors' dump their holdings for millions in profits." First things first - insider trading is perfectly legal. Officers and directors who owe a fiduciary duty to stockholders have just as much right to trade a security as the next investor. But the crucial distinction between legal and illegal insider trading lies in intent. As a result, two theories of insider trading liability have evolved over the past three decades through judicial and administrative interpretation: the classical theory and the misappropriation theory. The classical theory is the type of illegal activity one usually thinks of when the words "insider trading" are mentioned.
What is insider trading? According to Section 10(b) of the Securities Exchange Act of 1934, it is "any manipulative or deceptive device in connection with the purchase or sale of any security." This ruling served as a deterrent for the early part of this century before the stock market became such a vital part of our lives. But as the 1960's arrived and illegal insider
By
Jennifer Miller
Instructor
Margie Andrist
Business Ethics
The purpose of this paper is to review the phenomenon of illegal insider trading in the United States financial securities markets. The analysis section of this paper (a) defines illegal insider trading, (b) explains the enforcement of laws and regulations concerning illegal insider trading, (c) review the pattern of illegal insider trading from 1996 through 2005, and (d) compares the problem of illegal insider trading in the United States with the problem in other countries.
Consider this: "Imagine a boardroom of corporate executives, along with their lawyers, accountants, and investment bankers, plotting to take over a public company. The date is set; an announcement is due within weeks. Meeting adjourned, many of them phone their brokers and load up on the stock of the target company. When the takeover is announced, the share price zooms up and the lucky 'investors' dump their holdings for millions in profits." First things first - insider trading is perfectly legal. Officers and directors who owe a fiduciary duty to stockholders have just as much right to trade a security as the next investor. But the crucial distinction between legal and illegal insider trading lies in intent. As a result, two theories of insider trading liability have evolved over the past three decades through judicial and administrative interpretation: the classical theory and the misappropriation theory. The classical theory is the type of illegal activity one usually thinks of when the words "insider trading" are mentioned.
What is insider trading? According to Section 10(b) of the Securities Exchange Act of 1934, it is "any manipulative or deceptive device in connection with the purchase or sale of any security." This ruling served as a deterrent for the early part of this century before the stock market became such a vital part of our lives. But as the 1960's arrived and illegal insider