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Journal of Business Ethics

, Volume 77, Issue 2, pp 205–217 | Cite as

Applying Ethics to Insider Trading

  • Robert W. McGeeEmail author
Article

Abstract

Insider trading has received a bad name in recent decades. The popular press makes it sound like an evil practice where those who engage in it are totally devoid of ethical principles. Yet not all insider trading is unethical and some studies have concluded that certain kinds of insider trading are actually beneficial to the greater investment community. Some scholars in philosophy, law and economics have disputed whether insider trading should be punished at all while others assert that it should be illegal in all cases. This paper explores the nature of insider trading and analyzes the issues to determine the positive and negative aspects of insider trading, and how policy should be changed. The best hope would be for studies to be made that isolate the individuals or groups who are fraudulently harmed by insider trading. If any such groups exist, then clearly worded legislation could be passed to prevent any fraud from being committed against these individuals and groups, while allowing non-fraudulent transactions to be completed without fear of prosecution. Until it can be clearly determined that someone is fraudulently harmed by insider trading, there should be no law or regulation restricting the practice, since such restrictions violate individual rights and will likely have a negative market reaction.

Keywords

ethics  insider trading  level playing field property rights utilitarian ethics 

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Copyright information

© Springer Science+Business Media B.V. 2007

Authors and Affiliations

  1. 1.Department of AccountingBarry University, Andreas School of BusinessMiami ShoresUSA

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