Problems of Inside Trading Essay Example | Topics and Well Written Essays - 750 words

Problems of Inside Trading - Essay Example Also, their firms as well as those people who have invested in them heavily risk suffering financial ruin. Despite this issue, a number of people raise doubts based on their understanding of insider trading. These doubts usually prompt concern regarding the justice that surrounds the persecution of insider trading as well as the harsh moral judgments that people make regarding insider traders. These doubts prevail while trying to identify the moral wrong that prevails in the case of insider trading (Cohen, 2011). This paper will lay emphasis on the moral problems that are affiliated with insider trading and their influence in stock trading. An argument from the harmful side of insider trading maintains that it is wrong because it causes social harm. In this case, causing harm implies leading to failure to realize optimal social good or social welfare. In the case of a securities exchange, the losers and winners are those people who get bad prices and those who get good prices. When other things are held to be equal, the person who has the best information about what is being sold and bought is in a better position to find appropriate bargains that can allow him to get the best price (Shaub, 2011). While competing against corporate insiders who are in possession of superior information, a person increases the risk of losing. Most ordinary traders usually trade alongside insiders, and thus insider trading later undermines the confidence in the securities market, and thereby deterring investments. This incidence later raises the price that a firm is supposed to pay so as to raise capital and also hinders the economic growth of a society and development of a firm (Strudler, 2009). Most societies have moral reasons to protect themselves from being subjected to this form of economic harm, and the laws that prohibit insider trading provide appropriate protection. In this