In defense of non legalization of insider trading in the U.S. I will discuss and analyze the ethical issues. Although shareholders that buy and sell stock in their own companies are doing so legally, I believe the influence to cross the line is too much of a temptation. With illegal insider trading often being difficult to prove and strenous to investigate we should not legalize insider trading. Buying or selling security, in breach of trust and confidence , while in possession of material, non public information about the security is just unethical. Its too much like cheating. The ethical issue here is that using or bribbing to get information before it is publicly disclosed is a decison that lacks integrity. It is dishonest and unfair. Illegal trading is done without respect for investors and stakeholders as they are left with a false picture of the companies financial status in many cases. How would you feel if you paid to enter a contest where you bid how many jelly beans where in a jar to win a prize, only to find out that the person who counted the jelly beans was tipped by your opponent to tell them how many jelly beans where actually in the jar before he bid with you. The person that counted could say they didnt know the jelly beans where being used in a bid, therefore was unaware of the impact of disclosing such information. This is minor compare to the millions at stake in actuall insider trading but the result are often the same. Judges are left to prove illegal trading occured and/or whether the individual or group was aware that the information was not public at the time the purchase or sell took place. Insider trading is often unethical and I would leave it illegal in the US. http://www.sec.gov/answers/insider.htm http://knowledge.wharton.upenn.edu/article.cfm?articleid=2379 I am in favor of leaving the laws as they are or even tightening regulations on insider trading within the U.S. While as the article pointed out having inside knowledge of the inner workings of a company’s financial's or inner workings is not illegal, as anyone can do their own due diligence research to find out about a publicly traded company, having first hand material knowledge is wrong as it gives the upper hand to the individual with the material information in what is supposed to be a public toss-up. It appeared that the article was dancing around the term however, this breach is essentially cheating. While we teach our children at a young age that cheating, and stealing is wrong there are those who still violate this ethical issue and buy or sell stock with inside knowledge. If we were to apply a principle of ethics to this dilemma it would be the justice approach where everyone is given the same platform to buy, sell or trade their stocks on as this approach focuses on leveling the playing field. Going back to the principles we teach our young, there doesn’t seem to be any question as to whether an individual would be considered cheating if they were to either bribe their teacher into giving them an ‘A’ in the class, despite failing every exam or homework assignment. Or if a student were to pay a student aid for the questions to an upcoming exam, however this is the same concept behind insider trading, using information obtained illegally to make a profit, or avoid a substantial loss. While the article states insider trading is often hard to prove, as a judge or jury has to prove that the defendant knew the information was not publicly known, often times it goes back to the old saying of “if it sounds too good to be true, it usually is”.

-Brooke

Analyze and discuss ethical issues in defense of non-legalization of insider trading US The legalization of insider trading would be very chancy. A person would not truly know of the intention or motive behind the wanting of selling/trading stocks. According to the Rights Theory, it is within our moral rights to be told the truth. A person such as an employee of a company could have information that the company is on the verge of going under and wants to get rid of as many stocks as possible. This person could make up a lie in order to get rid of the stocks. The person selling or trading the stocks would be acting unethically

The legalization of insider trading also puts people at an unfair advantage. Certain people would be the first to know about certain information leaving others out of the loop. According to the Fairness or Justice Approach everyone deserves to be treated equally. The playing field should be level and everyone should have an equal opportunity for anyone seeking to buy, sell, or trade stocks.

In her article, Miriam Schulman defined insider trading as the “buying and selling of securities while being aware of material non-public information that is acquired through a relationship of trust or confidence; with an awareness of wrong doing”. (Markkula, 2012) Insider trading also covers the legal activities of individuals with direct access to information that can cause the price of a stock to rise or fall in the open market. An example would be a corporate executive who is negotiating the acquisition of a competitor, which will dramatically increase the company’s sales and market share. The Securities and Exchange Commission has strict guidelines that prevent the purchase / sale of securities by those with inside knowledge of business plans and or financial results, including restrictions on the sale of stock before earnings announcements and or publishing future stock purchase or selling plans for executives. Many economists such as Milton Friedman argued that insider trading is a good thing for the economy, as it “allows market prices to more quickly reflect information about the company”. From an ethics perspective, Milton’s position is grounded in the Utilitarian Approach or belief that by allowing insider trading to occur, we “provide the most good while doing the least harm”. Milton and other economist base their position on the idea that the market would be more efficient versus the regulatory burden that comes from trying to prevent a singular fraudulent event from occurring. (Wharton, 2009) Opposite this argument are economists who believe that insider-trading laws should remain in place and in some cases be strengthened. A case study is Enron, where company executives directed a massive fraud to reward themselves with stock options as the value of their company increased through time. Removing insider-trading laws would increase the potential for another Enron like scandal to occur in the future. From an ethics perspective, this position is based on the Fairness or Justice Approach. This theory is based on the idea “that all equals should be treated equally” and that benefiting from material non-public information when purchasing stock is not fair to those who do not have access to the same information. (Markkula, 2009) While both arguments have merit based on their ethical grounding, I favor the Fairness or Justice Approach which provides investors with confidence that their investments are being made in companies whose financial statements are truthful. References:
1: Insider Trading Enforcement, Markkula Center for Applied Ethics, Santa Clara University, 2012 2: A Framework for Thinking Ethically, Markkula Center for Applied Ethics, Santa Clara University 3: Why Insider Trading Is Hard to Define, Prove and Prevent, University of Pennsylvania/Wharton School of Business, 2009

If the United States were to not legalize trading many ethical issues would arise. Insider trading occurs when an individual will buy or sell secured information with knowledge of wrongdoing. This information is retrieved through a relationship of trust or confidence and the insider is clearly aware that material is for nonpublic information. Looking at this issue from an ethical standpoint insider trading brings the issue of fairness. People will benefit from this knowledge and will bring more and more insider trading. Insider trading can hurt investors and lose public faith in the markets. With insider trading there is also lack of loyalty, trust, integrity, and puts secure information at risk. In article “Why Insider Trading is Hard to Define, Prove and Prevent” brings up an interesting issue of corporate insiders violating ethical responsibilities of their own shareholders by profiting off of information that shareholders don’t know about. Corporate information belongs to shareholders and they should receive it at the same time so that no one has an advantage to profits. This is a great example of how insiders can be unethical to people and unfair. Regards, Vivian References Schulman, M. (2012). Insider trading enforcement. Scu.edu. Retrieved from http://www.scu.edu/ethics/practicing/focusareas/business/insider-trading-enforcement.html Why insider trading is hard to define, prove and prevent. (2009). Knowlegdge.wharton.upenn.edu. Retrieved from http://knowledge.wharton.upenn.edu/article/why-insider-trading-is-hard-to-define-prove-and-prevent/