Sometimes Trading Isn’t So Fair
| Not as innocent as she looks. |
The Stock Market can be a great thing. It makes a lot of people money while making a company more successful as well. In includes everyone in the World to make smart and sometimes risky decisions. While it has many positives, one huge negative part of the Stock Market is Insider Trading. This is when individuals who are influential within a company get potential access to non-public information about a company and use information to their or others advantage. For a better understanding, you should ask Matha Stewart. The innocent arts and crafts queen was sentenced to jail for securities fraud and obstruction of justice. Stewart, had an extremely active role within the stock market. One of her major stocks was going to plummet and she knew this from the inside. She avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock on December 27, 2001 after receiving material, nonpublic information from Peter Bacanovic, who was Stewart's broker at Merrill Lynch. The day following her sale, the stock value fell 16%. Basically, she knew something bad was going to happen with her stock, which the rest of the world did not know, so she took advantage and got caught for Insider Trading. However, she is not the only one involved in this crime. It's estimated that there are almost 1,000 insider trades a year. In 1934, shortly following the crash of 1929, the U.S. Congress created the Securities Exchange Commission (SEC) to protect individual investors. This commission quickly realized that corporate executives had inside information when trading their own company’s shares. Trades made by company “insiders” must be made public, in order to keep a fair trading system. They defined an insider as an officer or director of a public company. It also extended to individuals or entities who owned 10% or more of the company’s shares. Now, people can associate insider trading with almost anything. For example, while eating at a restaurant, if you were to hear the CEO of Company A at the next table telling someone that the company's profits will be higher than expected, and then you buy the stock, you are not guilty of insider trading unless there was some closer connection between you, the company, or the company officers. As you can see, it can be extremely difficult on how to pinpoint someone if they are actually participating in insider trading. You need a ton of evidence in order to prosecute someone of this crime.
Insider Trading is wrong and not fair to anyone who associates themselves in the Stock Market. While influential people are involved in this illegial activity, the government is hard at work cracking down on CEO's and investors. It's difficult to track, but due to its cracking down, insider trading has decreased within years. I find it really interesting how even 80 years ago, people were still trying to cheat within a system that is heavily monitored.
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