Insider Trading Essay - 1,049 words

Insider Trading Insider trading is a phenomenon of the modern business which unfortunately may occur in the very big world wide recognize companies and even more, it can lead to their collapse. The example of what insider trading can lead to and what can happen to the huge corporation, a world leader is the case of Enron. The main principle of the business is that all players are in equal conditions. The society had to work out certain rules of the big game which is called business. The cooperation may survive if it is fair and open. The business environment presupposes that all the participants have the equal possibilities and follow the same rules. Business is the basis of the country and the main engine of its development.


This is the reason the powers are extremely interested in developing the fair business relations. When we speak on the information we may state that it is the main tool of the companys development. If we assume that all the parties have the same entrepreneur skills, follow the same laws, pay the same taxes, use the same infrastructure, the only one thing which may benefit one of the party is the information. The question of the insider trading is the question of the business ethics. When the insider trader makes illegal profit on the information on the companys assets he is acting unfairly first of all regarding the company and other shareholders. The executives and the shareholders may be successful only if the company is successful itself.


The success of the executive is the component of the companys success and can not exist outside the corporative interests. The Enron scandal was a real shock for both American business and the world community. It is worth to note that such phenomena as insider trading may happen only with the big corporations. The bankruptcies of such companies undermine the national economies, trust of investors to stock market and lead to other irreversible negative consequences. The insiders break the main law of the market, i.e. the equal access to the data.


This is the worst harm that insiders bring to the business environment. There are no laws prohibiting the insider trading directly in the USA1. The insider trading may cause very negative consequence in the form of the investors mistrust and this factor may seriously spoil the investment activity. The insider trading became serious concern for the US authorities. US Security and Exchange commission adopted the Final Rule: Selective Disclosure and Insider Trading.2 According to Commission some issuers make the selective disclosure of material information before making full disclosure of the information to public. Some employees who have such preliminary information are able to make profit by using the information.


Such actions may lead to the loss of the confidence to American market. Sometimes investors do not understand the processes that are going on with the capital market. The deviations of the market can not be explained by the analytical means. The illegal insiders may bring a lot of losses to the company because their trading activity may contradict to the corporative objectives. When the insider makes the transaction illegally he does not care of the companys interest that opposes his mission in the company. The ...................................................................................................................................................................................................................................................................................................................................................................

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Essay Tags: insider trading, insider, stock exchange, enron, trading

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