The
newspapers have all gone crazy with headlines filled with people going to jail
for being involved in illegal insider trading. And then you find people legally
being involved in insider trading. Every morning the words insider trading
boggles you but you often ignore them. Today you’ll find out finally what
really is the difference between illegal and legal insider trading. But before
we jump to that, let’s us educate ourselves to what exactly is Insider trading
?
?
Insider
trading does not involve anything fancy, it is just like a normal trading
however the only difference is that if a person who has access to insider news
and information, let’s call him an insider gets involved in the trading then
that is called as insider trading. For example if I buy 20 shares of a company
called X ltd then its trading but If the employee of X ltd buys 20 shares of
the company then the same is called as insider trading, as the employee may
have access to inside information or news that is not open to the general
public at large.
Now,
obviously it may seem that Insider trading must be illegal because indeed a
person who knows insider information has an upper hand over the public
regarding the decisions about whether or not to invest in the company, or when
to invest. The US law obviously abides by this principles and calls insider
trading as unfair and thus is illegal in various other countries around the
globe. However, there exists a provision of legal insider trading, that is, if
an insider trades in securities like stocks or bonds without having knowledge
of an inside news then that is considered valid by the country’s law, provided
that the information is disclosed to the public and is told to SEC. Basically,
the laws emphasizes on the fact that no one should have an unreasonable edge
over the other.
Let me explain the
same with an example, if I’m the CEO of a company and I know that my company is
soon going to finalize a huge deal and I start buying stocks of the company on
that insider news without telling the SEC or disclosing it to the public then I
can be charged for illegal Insider trading must be illegal because indeed a
person who knows insider information has an upper hand over the public
regarding the decisions about whether or not to invest in the company, or when
to invest. The US law obviously abides by this principles and calls insider
trading as unfair and thus is illegal in various other countries around the
globe. However, there exists a provision of legal insider trading, that is, if
an insider trades in securities like stocks or bonds without having knowledge
of an inside news then that is considered valid by the country’s law, provided
that the information is disclosed to the public and is told to SEC. Basically,
the laws emphasizes on the fact that no one should have an unreasonable edge
over the other.. On the other hand if I buy the
stocks of my company just for trading and tell the same to the SEC then I’m
safe and no legal proceedings can be filed against me. If you are in the UK, you can get the books at amazon uk, click the books below to go there.
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