A major topic in today's business world is white collar crime. This can include a range of illegal actions, but in the financial sector insider trading is prominent. Insider trading includes the illegal buying and selling of securities as well as lawful conduct. Company employees are legally able to buy and sell shares of their company stock and report it to the SEC (Securities and Exchange Commission). Illegal insider trading refers to the use of non-public information or the misappropriation of such knowledge. These actions undermine the integrity of investment markets and therefore illegal insider trading is considered a serious crime with appropriate punishment (US Securities and Exchange Commission, 2013). An example of illegal insider trading might occur when an employee currently investing in your company's stock comes across confidential, non-public company information pertinent to how the stock price will change in the future. This could be by any means, including a tippee or accidentally overhearing a conversation. The employee then buys or sells shares using that information. This gives the investor a great advantage over other investors. However, the legal form of insider trading is slightly different. Without any type of fraud or misappropriation of information, there are no repercussions. Employees can trade company stock and notify the SEC when they do so to ensure their trades are accounted for. As long as the trades are not based on non-public or disclosed information exchanged, the trades are considered legal. This document addresses the legal type of insider trading. Many employees are committed to investing in their organization's stock, especially if that organization is growing or holding value well. Employees may also receive company stock as compensation. The main goal of investing is to maximize the value of your original investment, so investors want to make sound decisions based on their research and knowledge of the markets. The question being addressed here is, “Is it ethical for a middle manager to buy or sell personal shares of company stock when he or she predicts a rise or fall in the stock price based on his or her experience and knowledge of his or her company?” This article focuses on the question phrase "based on your company's experience and intuition." Instead of a more controversial topic of insider trading where one individual informs another in exchange for a certain reward or benefit, it involves an individual using their knowledge to make trades. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Insider trading laws are constantly under review, even today. A law regarding the information you may receive states: "...regardless of their motivation or profession, they come into possession of material company information that they know to be confidential and they know or should know comes from inside the company, they must publicly disclose such information or refrain from doing so." trading” (Eisenberg, Hastings and Porter, 2016). This law essentially states that when an employee makes a trade, they must report it to the SEC. Some cases that can become legal problems include when a company's employees or even their friends, family or any "tippeees" use confidential company information to buy or sell stock. It is also illegal for business partners ofan organization receives market information in exchange for services. There are also specific laws relating to non-trading relationships and how such relationships can determine whether a person is guilty of illegal insider trading (U.S. Securities and Exchange Commission, 2013). Insider trading is more prevalent today than in the past, with nearly 25% of trades coming from inside information (US stocks and securities)Exchange Commission, 2013). Insider trading causes the most tension with the government, considering that most actions are illegal. However, the issue addressed speaks to a different side of insider trading. Tension exists when one trading party has an advantage, and therefore a greater chance of making more money, over another. This advantage is based on knowledge and experience, which is in no way illegal to have. However, when a company employee has great knowledge about their company and experience working there, should they be able to use it to trade their own shares of the company? This is where the tension is created. Some people believe that it is unfair for some to use this type of information, even if it is not misappropriated, for their own personal benefit within the stock markets. To determine who exactly would be affected by these acts of insider trading, it is necessary to evaluate the affected parties. Stakeholders who would be part of this ethical dilemma would be employees (investors using their expertise), other investors (without the same expertise), the organization as a whole, the government, the economy and financial institutions. The directly affected stakeholders are considered primary stakeholders. Key stakeholders would be employees who actively engage in insider trading as well as investors who trade but do not have the same knowledge. On the other hand, there are stakeholders who are considered secondary because they are not directly affected by the actions or decisions in this situation. Secondary stakeholders would be the organization, government, economy and financial institutions. The main stakeholders are the employees of the companies who gain knowledge and experience through the years and work done at that particular company. The vision of the company referred to is not specific, as it differs for each individual and for the company. Another primary stakeholder would be other investors in the market, be they other employees of the same company or other investors in the same stocks. These people are influenced by the advantage that employees have using company experience. These employees have the upper hand on whether the stock price falls or rises, where other investors in the stock market do not have the same kind of knowledge. To their detriment, investors could lose a significant portion of their investment. Each stakeholder has a significant moral impact regarding the ethics of insider trading. For key stakeholders, the employee involved in insider trading benefits from the actions. The employee is using the knowledge or insights gained to improve the value of their actions. Thanks to his experience with the company, the employee will be able to anticipate an increase or decrease in the price of the shares and then sell or buy accordingly. This will ultimately cause them to earn more money through stocks or refrain from losing a large sum if this is the case. This gives the employee some financial stability, as long as his vision for the company serves him correctly. It is possible that the employee invests incorrectly and then loses money, whichinstead it would damage it. But above all this will help the investor increase the value of his shares. The employee also exercises the right to own and trade their personal shares based on their level of expertise. There is no embezzlement or fraud involved in this situation and therefore the employer has the right to do so. On the other hand, individuals who invest alongside that particular employee can potentially be harmed or benefited, depending on the markets. However, these investors do not have the same exact vision of the company and therefore are harmed by their lesser knowledge. These investors may not be able to anticipate a rise or fall in price and could end up losing large sums of money if they had been more aware of the company. The moral impact on secondary stakeholders depends very much on the appearance of financial markets, considering that they could lose or make money regardless of what an individual investor chooses to do. The company would be affected by the decision on employees and their investments. The company exercises its right to offer employees stock shares and to allow such employees to invest. This would benefit the company by adding value to its market shares. The economy as a whole can change through market manipulations, however this topic is not addressed in this specific ethical question. The government is indirectly influenced and is definitely exercising its rights in regulating the securities market. This is the government's responsibility to investigate and punish illegal behavior to keep the market honest. The government also benefits from maintaining order. The economy would also be affected, with harm or benefit. Several studies show the effects of insider trading on financial markets. These studies contain two conclusions: insider trading benefits or harms the economy as a whole. Engelen and Liedekerke show in their journal that a reduction in insider trading will in turn reduce market efficiency. However, during real trading it is difficult to distinguish between a type of trading that improves market efficiency, such as insider trading, or one that reduces efficiency, such as market manipulation (2007). Even with multiple studies and opinions on this topic, it is not possible to determine which type of securities influences what. Many people come to their own conclusions about the effects of insider trading on the overall market. Most agree with the theory that illegal insider trading, or market manipulation, will harm market efficiency and decrease its value. However, the legal form of insider trading is substantially increasing the efficiency and value of the market. There is no fraud or deception, so it happens as a normal investment would. The economy would benefit from the increase in the value of stocks and money, or the economy would be harmed if the value decreased. Financial institutions would be affected in the same way that the economy would be damaged: damaged or benefited depending on the performance of the markets. Insider trading was explained on the ethical issue: “It is ethical for a middle manager to buy or sell personal shares of company stock when they predict an increase or decrease in the stock price based on their experience and knowledge of their company ?" This type of trading is legal for business people compared to the more controversial illegal insider trading. The term insider trading has been defined as the illegal buying and selling of stocks, as well as the way in which corporate employees can tradeactions legally reporting to the SEC. However, legal insider trading is what is being addressed. Employees can use their knowledge and experience to buy and sell shares of personal stock. Tensions among investors are about who has the competitive advantage and who doesn't. The primary and primary stakeholders include the company's employees who invest in the company's stock who use their expertise to make decisions, as well as other investors in the same stock who do not have the same type of company knowledge. The next step to take is to determine whether insider trading is ethical or not. This document consists of three elements, including: economic outcomes, legal requirements and systems of ethical duties. These three elements are used as steps taken to reach a conclusion about the ethicality of the question asked. The economic outcomes of these ethical issues can be delineated by a certain model. Freidman's model fits this ethical question better. This economic outcome model, also called the shareholder model, emphasizes profits. There are three main points in this model. It is stated that companies cannot have social responsibility. This means that only people as individuals can have social responsibility. The second point states that employees cannot make the company socially responsible. This is because within a company, employees and employers have a principal-agent relationship. The employer is the principal who delegates responsibilities to the agent, who is the employee. Employees, as agents, have the direct responsibility to answer to the principal who is the employer. The agent's responsibility is to conduct business in accordance with the wishes of the owners or employers. This desire is to earn as much money as possible and maximize profits while abiding by the law without deception or fraud. The third point is that individuals can have social responsibilities. It is a person's right and choice to have such social responsibilities because it is an individual choice what to do in their free time and with their money. Every stakeholder within the company should be able to choose where and when to spend money. This does not mean that an individual can make a company socially responsible because corporate responsibility is separate from the individual responsibility of its employees. However, the only social responsibility of a business is to increase profits while staying within the limits of the law, without deception or fraud. If some sort of social responsibility generates goodwill as a byproduct of expenditures leading to increased profits, then social responsibility is beneficial in the long run. This type of goodwill can be defined as the creation of a company's reputation that is used as an asset in order to create higher business value. This makes sense from the shareholders' perspective if the goodwill created by individuals increases the company's profits, as long as it correlates with the principal's wishes for the company. This economic outcome model better fits the ethical issue surrounding insider trading. Friedman's model focuses on profits, which are essentially the core of insider trading. The only reason why individuals participate in buying or selling stocks is to increase their profits. They can potentially use as much information as possible to gain a competitive advantage over other traders in order to increase their profits. The employee who carries out the transactions and purchases shares of stock is his own principal and has the ability to act in the way he deems most profitable. Even when the employeereceives company shares as compensation, invests anyway in an attempt to earn more money. In this way, the stock trader can be considered a "business", as he works to make a profit. This “business” does not need to be socially responsible because it exists to create value for the owners (the merchant). The second point of Friedman's model states that employees cannot make the company socially responsible. This supports the idea that the individual trading stocks does not need to be socially responsible to others and can use the knowledge gained from their work experience to place trades. Even if other stock traders do not have the same knowledge, the individual with the experience should be able to use it to make educated trades according to this model. Social responsibility is not taken into consideration within the business community and profits are the most important aspect. Although an individual has the right to have social responsibilities, he or she also has the ability to choose whether to exercise or deny that right. This takes into account the third point of Friedman's model. The overall goal is to maximize profits within the limits of the law without deception or fraud. The ethical issue of this legal type of insider trading complements this goal. Insider trading using unique business experience completes the goal of maximizing profits for the "business". This type of insider trading also complies with all laws by the individual using only their own knowledge and not participating in any illegal activity related to stock trading. There is no deception here because it is publicly known that the employee works for the specific company and must comply with SEC regulations and report to the SEC with business information. I believe that the type of insider trading addressed by this ethical question fits best with Friedman's model of economic outcomes, primarily because both emphasize profit maximization. I agree with the focus on maximizing profits legally. Regarding this economic outcome model, insider trading is considered ethical. Insider trading consists of various situations and circumstances regarding individuals within the business community. Some types of insider trading are illegal and some are not. It all depends on what information is used to trade stocks and where exactly that information comes from. Legality also depends on whether the individual buying or selling stocks reports their actions to the SEC. Government-backed laws are constantly reviewed and changed from case to case, but some have been in existence for several years. The Securities Act of 1933 establishes requirements that investors must comply with when registering with the government (SEC). The main form of illegal insider trading is securities fraud. This includes a multitude of different situations, including using false information to obtain money or practicing deception against the purchaser of any security. Another section states that it is illegal for anyone to exchange a security for consideration without formally disclosing the receipt. There are some exemptions, such as the accredited investor exemption. This frees those with financial expertise from their own experience and knowledge to make informed investment decisions. This is decided on a scale of financial sophistication, knowledge, and experience (US Securities and Exchange Commission, 2013). This would apply many times to the employee trading the company's stock, as that investor has the means to be highly educated and capable of making investment decisions.smart investment. This definitely takes into account the legal side of insider trading. The government also takes into account the information exchanged, as well as commercial and non-commercial relationships. This may be considered a security fraud if the information is confidential and not public. However, such laws only affect an individual who participates in illegal forms of insider trading. The type of insider trading addressed by the ethical question is considered legal under the standards of United States law. An employee who uses his or her experience and intuition to buy and sell personal shares of a company meets the standards set by the government. This is completely legal under the law because the information they have is not technically confidential and may be in the public domain. Other employees are aware of the same information. This allows employees to legally use insider trading as long as they continue to report to the SEC. Accredited investors are even exempt from explicitly declaring receipts, considering that they have extensive financial experience in the markets. The type of insider trading addressed by this ethical question in the paper is the legal type, rather than the illegal type which involves many more complex laws that do not apply to this situation. Therefore, insider trading as defined in this document is deemed not only legal, but ethical. When individual employees are faced with ethical decisions, they must use an ethical system based on their personal beliefs or life experiences to arrive at the best possible decision. Individuals can use systems of ethical duties, in which there are key points that provide guidance in making a difficult decision. However, these systems all have some flaws that leave some problems unresolved. This makes it necessary to consider multiple task systems to make a fully informed decision by looking at issues from multiple points of view. All duty systems provide a decent way to conclude what duties individuals believe they owe other people based on rational thought processes. Most of these systems use the principles approach, which looks for some type of underlying universal principles that provide a solid foundation on which to base decisions. The two systems that I like best and that also apply to insider trading are the Principles of Universal Duties and the System of Utilitarianism. The Principles of Universal Duties are a system of ethical duties that can be used as a basis for making a decision when faced with an ethical question. This system is mainly contributed by Immanuel Kant. The fundamental principle in making decisions is to never take any action or make any decision that you would not like to see others do or make in the same situation. This principle is deontological, which focuses on duties. The advantage of this system is that it is universal and creates respect for people because it is based on the reasoning behind what is considered right and what is considered wrong. All of a person's actions are factored into the decision and the consequences of that decision. A guiding principle is necessary when distinguishing right from wrong because nothing in life is an absolute good except a person's good will. This goodwill is very different from the previously mentioned “goodwill” in the business world. An individual's goodwill takes into account his positive intent, his beneficial desire, and his recognized duty to help others. This is difficult to determine, however, because goodwill is internal and privatized within the individual. The Principlesof Universal Duties consist of three moral principles that are considered categorical imperatives. The first is that people should act only on reasons that they would be willing to make anyone in a similar situation act on. Under this imperative everyone is treated as a free person and equal to everyone else. People have a correlative duty to treat others in the same way they expect to be treated. This creates universality where respect applies to everyone and respect flows both ways. The second imperative is called the principle of ends. This principle states that each individual should treat others as ends worthy of dignity and respect. People should never be treated as mere means to another's ends. This highlights the fact that every person is deserving of dignity and moral worth. Human beings should never be exploited or manipulated. The last imperative is called the principle of autonomy, according to which every rational being can consider himself the creator of universal law. No external authority is needed. Examples of external authorities would be any god, government, culture, or any being capable of determining moral law. Rational beings are believed to be capable of discovering moral truth for themselves. This imperative focuses on a person's internal motivations rather than the consequences of their external actions. However, this tariff system has its flaws. There are no measuring tools to compare. Moral truths and rights will conflict from person to person. It can also be argued that not all beings are rational and that some humans are unable to reach any conclusions about moral truth. These flaws are the reason why one cannot rely on just one system of ethical duties. The second system of ethical duties is called the system of utilitarianism. The main point of this system is that an individual should not take any action that does not result in greater net benefit than harm. This should be exercised within the society or community of which one is a part, including businesses. A person should try to maximize positive outcomes or minimize harm. The main contributors of this system are Jeremy Bentham and John Mill. These founders realized that the law had value in society. They recognized that obedience to the law is a basic requirement for a productive and pleasant society. This also means that some laws can be manipulated and misdirected for individual benefit, especially by powerful central authorities such as the government. Both Bentham and Mill wanted a means of evaluating laws that were good and therefore should be obeyed as well as those that were not good and therefore should not be obeyed. They discovered that utility can be that means. Individuals are governed by the concept of increased pleasure and decreased pain. A party in a community is a group of individuals who associate freely. The fundamental principle of the utilitarian system is that action should be taken to create the greatest net good for everyone in society. This system is teleological, focusing on the consequences and end results of the decision or actions taken rather than the method taken to achieve the goal. This means that an individual should review and compare all the consequences of the possible outcomes of a given decision and choose the one that benefits the greatest number of people within a society. There should be a greater balance between benefits and costs for all concerned. This system also has flaws. There are no tools to measure thehappiness among people. This system also focuses on the ends rather than the means and methods to be adopted. There is also the danger of analysis paralysis. Using these two systems together can help an individual make a decision regarding the ethics behind insider trading. The Principles of Universal Duties are a good system to use to analyze the ethics of insider trading. This is because insider trading primarily affects the employee making the trades as well as other stock market players. The fundamental principle of the tariff system is to not make a decision or take an action that you would not like to see others free and encouraged to take. This can be applied to the employee who buys and sells stock shares because he can consider how his actions will affect others and whether he wants others to use his expertise to trade shares. The main advantages of this system are universality, so it can also apply to businesses and insider trading. This system is also based on respect for other people, which should be taken into account when deciding to participate in insider trading. The three categorical imperatives can also be applied to the ethical issue of insider trading. According to the first imperative, an individual must act only on reasons that he would be willing to make anyone else in the same situation act. As long as the employee using their expertise at their company to trade stocks would feel comfortable with other employees doing the same, this imperative is satisfied. Everyone is treated the same, regardless of the company they work for or the specific knowledge they have to use in the stock market (within legal limits). The second imperative is satisfied because no person is treated as a means to an end. In other words, no exploitation or manipulation occurs in this type of insider trading. The third imperative states that every rational being has the right to discover the truths of the moral law for himself without external authority. This implies that the trader would have the right to determine whether his actions are ethical or not, based on the assumption that he is a rational being and can come to such a conclusion. The employee engaged in commerce satisfies this imperative by having the ability to determine moral truths. I think the Golden Rule is an important aspect to consider when making a decision. I like how the decision is based on everyone getting equal treatment. In this way I consider insider stock trading that uses an employee's unique business view to be ethical. Another ethical framework is to consider all points of view, including those of other stakeholders. Using the system of utilitarianism, insider trading can be analyzed to determine whether it is ethical or not. This system states that an individual should not take any action that does not result in greater net benefit than harm to society. Applying this to insider trading, individual buyers and sellers of stocks should discern whether or not their use of knowledge will affect other stakeholders in a net positive or negative way. The goal is to maximize benefits and minimize harm. An individual should take the morally right path in each situation after comparing all other possible options that will produce the greatest balance of benefits and costs for all concerned. The trader would look at all possible stakeholders, including the company, other traders, the government, and the economy, and determine how their actions affect those people. The negotiation of.