Insider trading has always been an area of interest for me. The concept that a person with internal knowledge about a company can trade using this information seems like it could have its merits in some circumstances. However, as I have mulled over it further, I have realized how intricate and troublesome this practice actually is even when done with honorable intentions.
Insider trading is illegal for many reasons. These laws are put into place so that when any individual ventures into the stock market they are given the same chances as others. When insiders make use of undisclosed public information, they tilt the balance unfairly. Therefore, it becomes extremely unfair to ordinary investors who do not know such things. Consider if you were spending your hard earned money on shares of a certain company only to realize later that insiders manipulated everything for their own benefit making you not to stand any chance. It is not just fair but a total betrayal of trust.
The impact on the integrity of the markets is also considered. Stock exchanges are based on the idea that all information is available to everyone at the same time. It distorts stock prices when insiders trade using material undisclosed information. This practice does not only mislead other investors but can also cause a lot of damage to the whole market as well. The loss of faith in justness of this process by people might mean they will be less inclined to invest into it which in turn potentially disadvantages economy.
Others may argue that there are scenarios where insider trading would be justified, for example if it was done to prevent financial collapse. I get this reasoning and it’s tempting too. If a person possesses information that could save a company from collapsing, one would think he should use such knowledge to divert what seems like an impending disaster. But, even if intentions are good, their means remain illegal and unethical. It’s a slope, which once you enter makes it difficult for you to find some borderlines for such internal procedures-exceptions, making room for more abuse and corruption.
Often, there are alternative ways to tackle major challenges without breaking the law. Take for example when a company is in financial crisis; insiders can work with regulators to find legal options. They might also exploit strategic business choices that match ethical standards, which may not be quick fixes but they guard the integrity and trust aspects of any given business.
In my view, it’s ethically right that I should take the path of following legally sanctioned actions and being open in all dealings as this would be in favor of the organization and its stakeholders. The exercise of insider trading by influencing people breaches ethical standards. It could ruin reputation of the firm and cause long-term damage. Trust is an important factor in any kind of business association and once it’s gone, it becomes hard to rebuild.
Although it may be attractive to prevent a financial ruin by utilizing some internal knowledge, insider trading is still considered unethical. The integrity of the financial markets and equal access to information principles are too crucial to endanger. Any measures taken in addressing major problems should at all times be lawful and ethical. It’s not only about what might be helpful now but being trusted and treated fairly over time. That is why I strongly support non-allowance of insider trading under any circumstances.
Thanks you.
The issue with many people is that they don't really know what trading is most of the time. They just rush and rush to it and they finally come to discover that it is not actually what they think it is really
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