Insider Trading

InsiderTrading

InstitutionAffiliation:

Insidertrading

Dolgopolov (2008) defines insider trading as trading in anorganization’s securities such as financial options or shares bybusiness insiders or their acquaintances based on knowledge withinthe organization, which would influence the values of such shares oroptions if released to the public domain. In this regards, insidertrading yields significant proceeds to the insiders or those trading,but it can prove risky since it can unfavorably influence financialmarkets. In fact, as Dolgopolov (2008) maintains, insider tradingremains objectionable especially from the economic sense, but it isethically permissible in its entirety. As such, the discourse findsinsider trading morally permissible and offers elucidations to theeffect.

If one evaluatesthe morals of insider trading, he or she may find the notioninappropriate, but based on libertarianism as well as Kant’sunconditional imperative, the notion is ethically permissible. AsDolgopolov (2008) opines, principles of ethics show that the practiceis not as bad as economists want people to think since outsiderswould still trade in a said security in the absence or presence ofinsider trading. In fact, Dolgopolov (2008) shows that the practiceis not a zero-sum game as researchers demonstrate since people do notlose in the market because of insider trading thus, insider tradingis ethical as it does not involve losses, which means without lossesit cannot become fraudulent.

Based on Kant’sunconditional imperative and libertarianism there does not exist anyethical duty to inform a probable buyer that the price of a securitywill likely change in future thus, insiders do not have the ethicalduty to disclose changes in prices when non-public informationbecomes known. In addition, the practice does not violates any rightsespecially those of non-insiders. Kant’s primary imperative suggestthat an action becomes ethically right if an individual’s intentionfor acting is a motive that he or she would be eager to have everyindividual act on. For instance, a person who wants to sell stockwould wish that inside information became available so that the stockwill rise considerably and bearing two alternatives i.e. insidertrading or non-insider trading, the person would accept insidertrading as he or she would receive more from the stocks. In addition,the libertarianism asserts that an action is ethical as long ascoercion does not exist thus, insider trading is morallypermissible, as coercion does not exist.

References

Dolgopolov, S. (2008, January 1). . The ConciseEncyclopedia of Economics. Retrieved February 3, 2015, fromhttp://www.econlib.org/library/Enc/InsiderTrading

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