Insider Trading
Consider this: “Imagine a boardroom of corporate executives, along with
their
lawyers, accountants, and investment bankers, plotting to take over a public
company. The date is set; an announcement is due within weeks. Meeting
adjourned, many of them phone their brokers and load up on the stock of the
target company. When the takeover is announced, the share price zooms up and
the lucky investors dump their holdings for millions in profits.” First
things first – insider trading is perfectly legal. Officers and directors who
owe a fiduciary duty to stockholders have just as much right to trade a
security as the next investor. But the crucial distinction between legal and
illegal insider trading lies in intent. What this paper plans to investigate is
the illegal aspects of insider trading. What is insider trading According to
Section 10(b) of the Securities Exchange Act of 1934, it is “any
manipulative
or deceptive device in connection with the purchase or sale of any
security.”
This ruling served as a deterrent for the early part of this century before the
stock market became such a vital part of our lives. But as the 1960s arrived
and illegal insider activity began to pick up, courts were handcuffed by this
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