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Insider Trading and Ethical Dilemmas

   

Added on  2020-04-07

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Ethics 1COMPARATIVE BUSINESS ETHICS AND SOCIAL RESPONSIBILITYAuthorCourse ProfessorUniversityCity, StateDate
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Ethics 2COMPARATIVE BUSINESS ETHICS AND SOCIAL RESPONSIBILITYInsider trading calls into questions issues or legality and morality based on ethical considerations. The action taken when using insider information, should be analyzed from the perspective of whether the outcomes can lead to an illegality or not. The action could be legal butnot ethical. It could also be illegal yet ethical. Regulators, executives and investors have an important role in reducing the use of insider information within their spheres of authority. Variedimplications can arise when nonpublic information is used in trading company stocks. Investigations into cases involving insider trading require secrecy in order to reduce interference and tampering with the evidence. This is critical in successful prosecutions which serve as a deterrent for fund managers from taking similar paths and actions. Question oneInsider traders in Wall Street use a number of techniques in order to gain information which is considered nonpublic (US SEC 2017). These range from sifting through the garbage of the target company in which the information is being sought. Disgruntled employees are also used to give information about their companies either with financial inducement or out of malice.Moles are also planted within companies with the aim of collecting confidential information. Persons of high rank who are privy to confidential documents are also corrupted out of avarice inorder to leak news before it is made public. The above techniques of collecting information are common in Wall Street. Regulator, investor and executives can undertake the following measures in order to reduce such practices. RegulatorsThe main regulator tasked under the law is the Securities and Exchange Commission. Theregulator can push for the reform of the insider trading law as currently stated. The law is weak in setting out the penalties that can be meted out to those found to be culpable. The law is weak
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Ethics 3in substance but expansive in theory. Defense lawyers capitalize on this shortcoming when representing offenders who have been found guilty of breaching its tenets. Eisenberg & Gates (2017) state that in the ruling of Salman v United States, the Supreme Court refused to accept thetheories set out as having no basis in law. Strengthening the law would give the regulator more authority in successfully prosecuting such cases. Stiffer penalties and sentencing would act as thedeterrent that would curb the illegal techniques of gathering information. InvestorsInvestors often make choices to invest after receiving information from financial advisorswho operate in Wall Street. Some of these entities are in actual fact nothing more than illegal information gathering shops. These advisors form part of the intricate labyrinth within Wall Street that propagates the continued use of techniques that are illegal when gathering information. Investors can help curb such practices by undertaking due diligence to establish how such financial advisors gather their information. Seeking the SEC in cases where they need confirmation is advisable before engaging such firms. This will help reduce the use of such practices and which is the basis of insider trading. This will also help to protect the funds they have been tasked with investing. ExecutivesExecutives can reduce this vice from two perspectives. The first perspective is where the executive is leading a firm engaged in trading shares or managing funds. Having a strong and clear organizational policy on insider trading is important. It should spell out the boundaries of trading together with penalties applicable for breaches. Sherwood (2012) states those blackout periods should be included in such a policy. This includes periods such as before companies release material information or the release of quarterly earnings. Limitations on how employees
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