Ethical Analysis of Insoder Trading

The practice of insider trading is a tricky subject, and needs continued definitional updates in order for it to stay current with the times. There are so many variables to consider when analyzing someone actions as being either moral or immoral, it would seem that it is almost impossible to have a complete consensus from a majority to either condone or reprimand someone in question. The recent additions to accountability laws are essential and necessary in the upheaval corporate America is currently facing. As much as everyone wants to make examples out of the first few major violators, like Enron, ImClone System, Martha Stewart, and numerous others, those handing out the sentences must prudently do so, because these sanctions lay the foundation for future cases.

To many, insider trading conjures images of high-level secret and underhanded meetings among executives involved in complex and convoluted mergers. But in reality for most participants, either directly or indirectly involved in the circumstances surrounding the invaluable information, crossing over to the unlawful side of insider trading could be as straightforward as giving your grandmother a tip about a major developments within a company before that information is released to the public, even if you do not trade the stock yourself (Reid). The further one is away from the primary source of the insider information, the more problematic and challenging cases become. The boundaries of what constitutes legal and illegal insider trading are somewhat ambiguous, the gray area becomes clearer as time goes on and more cases are brought to the surface; each of these cases unique and different, helping to further clarify the differences. “Most insider trading is illegal and is also unethical, not merely because it is illegal, but because, it is claimed, the person who trades on insider information in effect ‘steals’ this information and thereby gains an unjust or unfair advantage over the member of the general public” (Velasquez).

Typically one can categorize insiders into three factions: (1) registered or true insiders, which include company officials, certain upper level employees, and major stockholders, possessing information not available to the general public; (2) temporary or quazi- insiders, such as accounts or lawyers, persons who are not permanently employed by the company but often have access to valuable nonpublic information, and (3) outside insiders or tippers often friends or family of employees who receive tips from registered or temporary insiders. The consequences of insider trading are, by and large overlooked and scoffed at, and can be relatively severe for both the insider disseminating the information and for the company they are employed by. Indictment for insiders could be civil penalties or criminal penalties or both. The culpability factors used to decided the company in question degree of guilt depends on four factors: (1) organizational size, (2) involvement of top officials, (3) prior violations, and (4) obstruction of justice. The fines range from a fine of $0.05 to $4.00 for every dollar profited. The insider could receive an array of sentences, ranging from facing time behind bars to paying back all earning made off the inside information to pa

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