Insider Trading of Europe Insider Research Paper

Download this Research Paper in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from Research Paper:

Although permitting access to key corporate information by all employees could generate an insider trading nightmare (Fishman & Hagerty 110).

Possible solutions to the conflict

One question that everyone is asking is; how can this conflict be resolved? A palpable, simple, and stout approach would be returning the choice of insider trading regulation to individual firms. It is difficult to make out an externality that would validate putting this decision into the hand of a regulator. The most reasonable story that can be imagined is that board directors might disregard what is excellent for stakeholders and do just what fits the insiders. If this story was not found to be reasonable then firms could just be allowed to decide how to weigh any costs from daunting investment through unfavourable selection alongside any gains of using prediction markets to advance corporate information and coordination efficiency. This resolution, however coercing, seems politically infeasible for now.

Another comparatively strong approach has been proposed over and over again over the years, this was a requirement for all insiders to preannounce sales stock in their companies. This was a recommendation put forward by a blue-ribbon commission that assembled to address financial indignities and ensuing decline in investor confidence in the year 2003. "The commissions call for insiders to preannounce their sales echoes proposals made over a decade ago in the legal press, law reviews, and the U.S. Congress that would require preannouncement of all trades" (Huddart et al. 1). A common version of this proposal would offer average people much more protection from undesirable selection in trades than contemporary insider trading laws. It would also tolerate individuals and organizations much more suppleness in selecting their information policies, suppleness that they could use to discover decision markets and other fresh decentralized information processes.

The basic proposal would be to categorize traders into ordinary traders and numerous levels of privileged well-informed traders, and only permit trading between levels when the more informed trader has made known his specific planned trade prior. In properly functioning markets, even an hour might be ample of notice. Such a rule would widely do away with undesirable selection between levels, undesirable selection would mostly remain among traders of the similar level. Those who were required to preannounce their trades would find it rather harder to use markets to evade their risks (Huddart et al. 1), but being given the label of a well-informed trader should be much less limiting than being labelled an insider in the existing insider trading rules. Well-informed traders could be allowed to become well informed to the level of their desire and to reveal information discerningly to others within their level thus there will be far less necessity for rules on disclosure (Gupta 227).

In this proposal, well-informed traders would have the choice of forming their own unique markets to trade with one another, or to flag offers in a common market outside their level, and even to caution traders with lesser information. A 'well-informed traders' label could be practical not only to corporate insiders, but also to the well-informed outsiders such as hedge funds among others. It appears that there are a number of approaches that could agree to the wide use of prediction markets within firms that also keep average people from suffering bungling undesirable selection in stock trades, however, the status quo insider trading regulations are not favourable to any of such approaches.


There have been a lot of arguments from legal scholars and economists suggesting that laws illegalizing insider trading should be repealed with claims that the insider trading dependent on non-public information benefits investors, in general, through the quick introduction of fresh information into the market. Some of them believed that the trader had no obligation to make the public aware of his trade. From whatever angle this debate is looked at, its still widely acceptable that insider trading is not a perfect trend but a better one. Even though there are a number of conflicts that are related to insider trading, a number of resolutions have been proposed and when properly applied will work to the benefit of both the traders and the ordinary people.

The other concern about insider trading is the directive on regulation, as indicated in the beginning, the E.U. insider trading directive is profoundly predisposed by United Sates securities laws, however, when compared it is found that there is a clearer definition of some terms and consequences in E.U. law. Another interesting point to note is that insider trading was regarded as right in many European countries until the introduction of the directive which is one of the success stories in the implementation of United States' capital market system overseas. Therefore, the insider trading in Europe encompasses a lot of directives at the moment which has led to a number of distinct views as to the legality of the practice.


Brandenburger, a. & B. Polak. "When managers cover their posteriors: Making the Hanson, R. "Decision markets." IEEE Intelligent Systems 14(3) (1999):16 -- 19.

Hatter, a. And E. Trapasso. Managers say the majority of information obtained for their work is useless, Accenture survey finds. 2007. 11 March, 2010. .

Huddart, S.J., et al. Pre-announcement of insiders' trades. 28 June, 2004. 11 March, 2010.

Fishman, M.J. & Hagerty, K.M. "Insider Trading and the Efficiency of Stock Prices." Rand

Journal of Economics, 23 (1992): 106-122.

Gupta, a. & Misra, L. "Public Information and Pre-Announcement Trading in Takeover Stocks." Journal of Economics and Business, 41(1989):225-233.

Sunstein, C.R. Infotopia: How many minds produce knowledge. Oxford University Press, 2006. Surowiecki, J. The wisdom of crowds. Doubleday. 2004

Tridimas, Takis. "Insider Trading: European Harmonisation and National Law Reform."

International & Comparative…[continue]

Cite This Research Paper:

"Insider Trading Of Europe Insider" (2010, March 12) Retrieved December 10, 2016, from

"Insider Trading Of Europe Insider" 12 March 2010. Web.10 December. 2016. <>

"Insider Trading Of Europe Insider", 12 March 2010, Accessed.10 December. 2016,

Other Documents Pertaining To This Topic

  • Insider Trading Risk Assessment Insider

    However, it would be safer to follow general policies that are being followed even now. This means that one should pass on published information to shareholders on the Internet as it would be simpler and less expensive to send. This may include information about quarterly results, monthly turnover, changes of directors, appointment of new sales agents, general trends of markets at certain times, etc. The question would still remain

  • Insider Trading From a Utilitarian Ethical Point of view

    Insider Trading from a "Utilitarian" ethical point-of-view. The paper discusses types of insider trading, the Utilitarian theory of Ethics and the arguments for and against insider trading. Ethics of Insider Trading Insider Trading generally refers to the buying or selling of financial instruments (usually in the stock market) on the basis of privileged information that is known to a restricted group of people. Debate has raged among economists, traders, businesspersons, philosophers

  • Insider Trading on June 4 2003 the

    Insider Trading On June 4, 2003, the Securities Exchange Commission announced that it was pursuing charges against investor Martha Stewart and stock broker Peter Bacanovic for securities fraud. The fraud occurred on December 27, 2001 when Stewart sold stock in ImClone Systems, after receiving an unlawful tip from Bacanovic, who at the time was working for Merrill Lynch. The SEC also accused the two of attempting to cover up the insider

  • UK s Membership of EU and Its Impact

    UK's Membership of EU and its Impact on Insider Trading The European Union has recently introduced criminal sanctions in all its member countries in cases of market manipulation and insider trading. The new regulations are quite strict and are essential in reforming the financial markets. There are two directives Market Abuse and Criminal Sanctions [footnoteRef:1]and MFID [footnoteRef:2] have been introduced recently by EU in their pursuit to eliminate market manipulation and

  • Dell s Inc Accounting Fraud

    DELL INC. FRAUD Business practices came under fire when America's seventh largest firm Enron collapsed due to unethical accounting strategies. This case triggered a series of unwelcome events where one after the other, large organizations in the U.S. collapsed or run for bankruptcy cover with one case even implicated the infamous Martha Stewart for insider trading. The various deceitful activities of some larger companies resulted in widespread public mistrust of business

  • Finance One Difference Between Industries With High

    Finance One difference between industries with high leverage and low leverage is a split between the need for fixed assets (high leverage) and a reliance on intellectual capital (low leverage). Airlines need planes, construction companies need equipment, and communications and hotel companies need infrastructure capacity. This compares with computers, drugs, biological products, educational services and electronics, all of which rely heavily on intellectual property to derive value. The conclusion that one

  • Delimitations Today Modern Business Systems

    A favorite target for conspiracists today as well as in the past, a group of European intellectuals created the Order of the Illuminati in May 1776, in Bavaria, Germany, under the leadership of Adam Weishaupt (Atkins, 2002). In this regard, Stewart (2002) reports that, "The 'great' conspiracy organized in the last half of the eighteenth century through the efforts of a number of secret societies that were striving for

Read Full Research Paper
Copyright 2016 . All Rights Reserved