Unethical Insider Trading
Insider Trading refers to any insider i.e an individual or group of people who have material information which is not available to the general public, and engage in trading of securities, for which they seek to gain benefits. Thus, whenever a corporate insider wants to buy or sell shares withing the firm where he works, he is most likely conducting unethical behavior and following ethical issues might raise because of his activities:
Asymmetry of Information:
Whenever a corporate insider indulge in buying or selling stocks based on insider information, it is considered to be unethical because all the participants to the market do not transact with equal information and it is only the corporate insider which is being benefited becauase of some material information which is not known to a public shareholder.
Contravention to Property Rights to Information:
Conducting insider trading also leads to contravention to the Property Rights to Information i.e just as property and inventions,Inside Information is just like a common property for the investors and transacting solely on such information is a violation of Property Rights and an ethical issue.
Counter to Fiduciary Duty:
The theory of Fidcuiary Duty asserts that the insiders to the organization have an ethical duty to enhance the interest of shareholders and not only the entrepreneurs, but the entrepreneur, managers and workers all share this responsibility equally. Hence, any act where they use material information for their personal benefit is a violation of Fidicuiary Duty.
Thus, with above ethical issues discussed in relation to Insider Trading, we can conclude that Insider Trading is indeed an unethical practice against the interest of shareholders.
Works Cited
O'hara, Philip Anthony. Insider trading in financial markets. Research. Perth: Curtin University, 2012.
