WMAC7893 Module 13 RRM

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Robert Stinson WMAC 7839 Spring 2023 Module 12 Insider trading is utilizing nonpublic information when buying or selling securities (Kurov & Wolfe, 2022). This is a problem because it creates an uneven playing field for investors. Unfortunately, greed is a mighty motivator, and the punishments be as minimal as months in some cases. As long as the potential for profit exists, there will always be someone that feels the juice is worth the squeeze. Insider trading should be a crime. The problem with financial markets is not that people with access to inside information do not have enough access to profiteering. Inside trading is a multibillion dollar problem annually (Kurov & Wolfe, 2022). Insider trading benefits those in the know to the detriment of others. Per the referenced article above, insider trading drives down market liquidity, which makes trading more expensive and reduces returns. Also, it is important to consider how important consumer confidence is to the global economy. Insider trading has the potential to degrade trust in financial markets and instruments. While a few benefit from insider trading, the negative impacts are felt well down the line. As the scheme continued, I believe Matthew realized his actions would lead to trouble. As the first to exit the trio, he saw the potential for trouble when the SEC came sniffing around. Historically, insider trading is a frequent occurrence in the stock market. People may not know the information they have is fruit from the poisonous tree (O’Hara, 2012). One of the common occurrences with insider trading is the inability to quit while ahead. Money flows freely, and greed makes it difficult to stop (Rothfield et. Al, 2012). Matthew Kluger was smart enough to take a step back when investigators became interested in the group’s dealings. He clearly knew something wrong was occurring. The hypothetical moral questions are always the hardest to answer. If in the same position as Matthew Kluger, I would hope I did not act in bad faith on information I gained. I despise people that take advantage of unfair occurrences. In my mind, it would be a simple choice to act with integrity. In reality, the decision would be much harder. Life is expensive, particularly when you have kids. The possibility of a dramatic income increase with little risk is an attractive proposition. I think the stories referenced here provide a good lesson for people faced with this decision. The question remains how would you do in prison? Personally, I do not think I would do particularly well. I’d also be a terrible criminal, as my attention to detail is often lacking. Insider trading may seem like a harmless crime, but there are many negative consequences. Primarily it is an abdication of fiduciary duty. The asymmetrical nature of insider information makes it inherently unfair (O’Hara, 2012), An unfair playing field is already a reality in many financial markets. Insider trading allows those in the know, who often already have greater access to profits, to have a leg up on others. This should not be the foundation our financial markets are built on.

Robert Stinson WMAC 7839 Spring 2023 References Kurov , A., & Wolfe , M. (2022, November 16). What's insider trading and why it's a big problem . The Conversation. Retrieved April 23, 2023, from https://theconversation.com/whats-insider-trading-and-why-its-a-big-problem-176940 Phillip Anthony O’Hara, 2012. "Insider trading in financial markets: legality, ethics, efficiency," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 28(10/11/12), pages 1046-1063, December. Rothfield, M., Pulliam, S., & O'Connell, V. (2012, January 12). The confessions of an inside trader . The Wall Street Journal. Retrieved April 23, 2023, from https://www.wsj.com/articles/SB10001424052748703983104576262921972017168

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