It seems perfectly natural and innocuous that those with the most information would want to profit from it, and doing so isn’t illegal anywhere else. So why is it prohibited to make trades based on information not everyone has? What undesirable thing does this prevent?
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If it wasn’t illegal people could scam massive amounts of money from people. It’s incredibly unethical and wrong.
It’s a spotty concept. If you have “info” you can make moves but it’s really a case by case basis
If it wasn’t illegal people could scam massive amounts of money from people. It’s incredibly unethical and wrong.
It’s a spotty concept. If you have “info” you can make moves but it’s really a case by case basis
The undesirable outcome is that people with inside information would be the only ones who could ever profit. It’s called public trading because it is meant to be public.
Insider trading makes the stock market unfair. Those with insider knowledge will always be able to take advantage of those without insider knowledge.
Imagine if you could play poker against someone and the rules were that they could see your cards but you could not see their cards. You would know you could not win and would not play.
So if insider trading were legal, no outside investors would invest in the stock market because it would be rigged against them. So there would be no stock market.
The undesirable outcome is that people with inside information would be the only ones who could ever profit. It’s called public trading because it is meant to be public.
The undesirable outcome is that people with inside information would be the only ones who could ever profit. It’s called public trading because it is meant to be public.
Insider trading makes the stock market unfair. Those with insider knowledge will always be able to take advantage of those without insider knowledge.
Imagine if you could play poker against someone and the rules were that they could see your cards but you could not see their cards. You would know you could not win and would not play.
So if insider trading were legal, no outside investors would invest in the stock market because it would be rigged against them. So there would be no stock market.
Not a lawyer…
Insiders have fiduciary duty to the company. This means they are required to put the company’s interest above their personal interest in various matters, including trading. Trading on insider information violates this, as it profits the insider above the other shareholders without this information.
Note they are still allowed to trade, but they are subject to some rules (including reporting).
Note also insider trading isn’t just limited to insiders, so based on these grounds the law covers scenarios where material non public information is held by non-insiders.
If it wasn’t illegal people could scam massive amounts of money from people. It’s incredibly unethical and wrong.
It’s a spotty concept. If you have “info” you can make moves but it’s really a case by case basis
Not a lawyer…
Insiders have fiduciary duty to the company. This means they are required to put the company’s interest above their personal interest in various matters, including trading. Trading on insider information violates this, as it profits the insider above the other shareholders without this information.
Note they are still allowed to trade, but they are subject to some rules (including reporting).
Note also insider trading isn’t just limited to insiders, so based on these grounds the law covers scenarios where material non public information is held by non-insiders.
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