Trading Places

TP

Summary: If you anonymously asked the average employee their opinion on insider trading, what do you think their beliefs would be? This is a widely debated topic.  Insider trading is defined as trading on nonpublic information. Although some people believe that insider trading is wrong because it gives certain individuals unfair market advantages, others believe that an “insider” has no moral obligation not to disclose a future price change to the public. Additionally, supporters of insider trading also believe that it does not create a loss, and therefore, no fraudulent action has been committed. However, according to the U.S. Securities & Exchange Commission, insider trading is deemed illegal and carries heavy prison sentences.

This case explores the story of a day trader who was a member of a 17-year insider trading ring that resulted in profits in excess of $37 million. Despite the fact that his actions were illegal under U.S. law, more than 150 business school students wrote letters of support to the judge who presided over his federal prison sentencing hearing. 

 

Learning Objectives:

After reading this case, students will be able to:

  1. Define insider trading.
  2. Gain an understanding of the ethical implications of insider trading.
  3. Gain an understanding of the history of insider trading.
  4. Improve critical thinking skills.
  5. Enhance writing communication skills.