Argumentative Essay On Insider Trading

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If you have ever traded in the stock market, or have any knowledge about the stock market at all, you surely have heard the term “insider trading”. This term has a negative connotation to most people and is usually associated with illegal conduct. What most people do not know, is that insider trading can be conducted in a legal way. So what exactly is insider trading? It is defined as “the buying or selling of a security by someone who has access to material, nonpublic information about the security”. CEOS and employees of certain companies usually know, or can more easily obtain, information about the company that individual investors and outside people may not know. They may have an insight on future decisions the company is going to make …show more content…

Some say that making decisions based on special, inside knowledge is unfair to other investors. Others think that it is not the insiders fault for having access to additional information just because they work for a certain firm and they should be able to make their own decisions based off the information available to them. Besides both sides of the argument, insider trading can be extremely hard to prove. How do you really know if an insider made their trading decision based on the special information they knew? Maybe it was just a coincidence on when they decided to buy or sell their shares. The U.S. Securities and Exchange Commission monitors the market to try to detect insider trading by looking at trading volumes of certain stocks. Stocks can increase or decrease significantly after material news is announced to the public. But when volumes change dramatically with no new information provided to the public, the SEC takes this as a warning flag. They can then start to investigate and find out why unusual trading patterns are occurring to see whether or not it is illegal insider trading activities. When insiders trade their securities of their firm, the transactions must be registered with the SEC as another way to track insider trading in the market. Insider trading is a complex subject and there are many arguments for both sides. The three main arguments against

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