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need for regulation in context of financial reporting
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The use of insider information is illegal in the United States. Insider information is stock related information that can be obtained many ways to gain large, abnormal gains in the stock market. A popular way to gather inside information is from direct employees of the company. Information on stocks can either be illegal or legal. If the information is publicized for all current or future investors to use, then it isn't illegal. Illegal information becomes unlawful when it becomes privatized from the public, and to be only used by investors in the stock market. The action of using insider information isn’t considered illegal until the information is used in a stock market located in the United States, most commonly the New York Stock Exchange, or NYSE. Investors shouldn't need to worry about whether the information they’re given is illegal. Instead, the government should become lenient and abolish the act that prohibits investors to use insider information. Investors need to come together to protest against congress. If we abolish the act that forbids investors to use inside information, then the economy in general will grow from the freedom given by the government. Milton Friedman and Adam Smith both had similar ideas when it comes to laissez-faire which is referred to as “let it be economics.” Laissez-faire is a theory which opposes to any government interaction in business affairs. Friedman, an American economist, statistician, and writer who taught at the University of Chicago, believed that, “A laissez-faire government policy would be more desirable than government intervention in the economy” (New World Encyclopedia). Friedman believed in a laissez-faire government policy, because he assumed that it would help businesses th... ... middle of paper ... ... J.R. "Why Legalized Insider Trading Would Be a Disaster." Delaware Journal of Corporate Law 38.1 (2013): 247-73. ProQuest. Web. 21 Mar. 2014. Friedman, Milton. “Capitalism and Freedom.” Chicago: The University of Chicago Press, 1962. eBook. Jagolinzer, Alan D. "SEC Rule 10b5-1 and Insiders' Strategic Trade." Management Science 55.2 (2009): 224-39. ProQuest. Web. 21 Mar. 2014. Matthews, Dylan. "Insider Trading Enriches and Informs Us, and Could Prevent Scandals. Legalize It.." The Washington Post 26 July 2013: n. pag. Print. "Milton Friedman." - New World Encyclopedia. N.p., 19 Nov. 2013. Web. 3 May 2014. . Sabino, Anthony Michael, and Michael A. Sabino. "From Chiarella to Cuban: The Continuing Evolution of the Law of Insider Trading." 2011.Web. Smith, Adam. Wealth of Nations. New York: 1776. eBook.
Last year saw the scandal of a DraftKings employee wining around $30,000 on FanDuel. The problem is that the employee used insider information to make the winning bet. This resulted in an uproar as many felt that this was unfair. The companies went under the microscope to ensure their processes were not being exploited and people were playing fair.
The seriousness of insider trading was not brought to light until some time after the stock market crash of 1929. This specific event can be summed up as a day where many investors traded around 16 million shares
Though the Securities and Exchange Commission rules governing selective disclosure and insider trading contain no provisions relating specifically to the health of executives, publicly traded companies must nonetheless manage the potential implications of their key executives’ health on perceptions of the company’s future success as well as their propriety in disclosing information material to investors. This can be a difficult task, as an employer disclosing particulars about an employee’s health seems to run contrary to the special privacy protections given health information in the U.S., yet such information can undeniably affect investors’ decisions. Recently, the Securities and Exchange Commission launched a probe to evaluate statements made by Apple, Inc. regarding the health of CEO Steve Jobs. While not yet a formal investigation, this unprecedented evaluation of health-related disclosures raises significant issues about how such information should be treated and how the rights of investors are to be weighed against the rights of executives. Additionally, if this practice becomes regular, it could lead to unfair and burdensome erosions of executives’ rights to privacy and medical autonomy.
A possible flaw of Sarbanes-Oxley is it failed to put up any resistance in thwarting the financial crisis. While the degree to which fraudulent behavior can be traced to the roots of the Great Panic of 2007 will likely be up for eternal debate, it might be telling that Sarbanes-Oxley effectively did nothing. It seems this could indicate that stronger incentives for whistleblowers (such as Dodd-Frank and perhaps other whistleblower protection regimes) are very necessary given the extreme social costs. This conclusion may be hasty, however, given the short time period between the enactment of Sarbanes-Oxley and the crash. Not only is the status of Sarbanes-Oxley still in flux over a decade later, but one has to consider the substantial learning and switching costs associated with a regime with such a substantial ruach. Certainly, this is not to say that additional protections may in fact be necessary given the putative reluctance of lawyers to report fraud, but Sarbanes-Oxley likely needed more time to really crystalize and provide some level of predictability before it can be declared a bust.
Before the introduction of Keynesian economics and Milton Friedman’s Monetarism theory, there was classical economics. These economists believed in self-adjusting market mechanisms, however with that the market needs perfect competition. Wages and prices in the market must be flexible. These economists believe that supply and demand pulls would always help the economy reach full employment.
“Men desire to have some share in the management of public affairs chiefly on account of the importance which it gives them.” This famous quote by Adam Smith proves what people in the Enlightenment period wanted the most – free market economy and public services. Adam Smith was, in fact, a Scottish economist, who tried to influence the government and convince the ruler to fulfil people’s wishes and needs. Such craving for an “adjustable” trade, led to the first major economic establishment in the Enlightenment period, laissez faire, which banned the government from interfering with private trade. Adam Smith, its huge supporter, managed to get this concept to disseminate safely with various rules and restrictions attached; otherwise, this method might allow too much freedom. The economy during the Renaissance period, transforming especially with Adam Smith’s innovative theories during the Enlightenment, focused on the urge to limit the government’s ability to interfere with the market.
Goshen, Zohar. "The Efficiency of Controlling Corporate Self-Dealing: Theory Meets Reality." California Law Review 91.2 (2003): n. pag. JSTOR. Web. 21 Oct. 2013.
If the president tells his barber, who tells his baby sitter, who tells her doctor, who tells you, the barber, baby sitter, doctor and you are all "temporary insiders". Anyone who has material information is prohibited from trading, based on that knowledge, until the information is available to the general public. In addition to the financial penalties, there are criminal penalties. Many now feel those penalties are not strong enough and are working to increase them
Wall Street in the 1980s had big competition among the brokers to make money in legal and illegal ways. Although, making money was easy and quick, but nothing can compare to Bud’s guilty feelings. Bud causes loss of
Insider trading has been a commonly discussed topic since Martha Stewart was accused, tried, convicted, and served a prison term for her involvement with the Inclon trading scandal. However, the definition of the term “insider trading” is not necessarily always connected with illegal activity. As a matter of fact, in some jurisdictions, “insider trading is no crime. Traditionally, it has been an expected, and perfectly acceptable prerequisite of certain sorts of employment.”(Insider Trading). But since the latter part of the 1960’s, stricter enforcement of insider trading practices have been put into place because of financial scandals.
The term “insider trading” is defined by the Black’s Law Dictionary as -“The use of material non public information in trading the shares of the company by a corporate insider or any other person who owes a fiduciary duty to the company.”
However, insider trading is illegal in recent year which restricted by the law since it is not fair to the other small investors. (Seyhun, 1986)
D’Andrade, Kendall (1985) Bribery in the Journal of Business Ethics, D. Reidel Publishing Company (Boston), pp. 239-248.
Near, Janet, and Marcia Miceli. "Effective Whistle-Blowing." The Academy of Management Review 20.3 (1995): 679-708. JSTOR. Web. 7 Feb. 2014.
This case study is not about Ms. Stewart direct participation with illegal insider trading as the media had steered the public to believe. To begin, Ms. Stewart received a phone call from Ann Armstrong, her assistant, stating that Peter Bacanovic, her stockbroker, “thinks ImClone is going to start trading down.” (Arnold, Beauchamp, Bowie, 2013, p. 390) Although Ms. Stewart was not able to get a hold of Peter, she talked to his assistance, Douglas Faneuil,