what is inside trading? is it illegal?

Question

it is about the movie WALL STREET in 1877...............

Answer 1

The term "Insider Trading" actually includes both legal and illegal conduct.

The legal version is when corporate insiders—officers, directors, and employees—buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC.

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Examples of insider trading cases that have been brought by the SEC are cases against:

* Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

* Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

* Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

* Government employees who learned of such information because of their employment by the government; and

* Other persons who misappropriated, and took advantage of, confidential information from their employers.

Answer 2

Insider trading is when you have knowledge about a company that the public does not have access to. This is usually because you work at the company and are probably a high ranking officer. You may have knowledge about a pending legal matter that is about to go against you or a new drug that is going to be rejected by the FDA. In each of those cases you would sell your company stocks before the news of those events is actually released to the public and you would not lose money when everyone else sells their stocks the next day. It is very very illegal and it really isn't too hard to find out when people do it. But... money talks so people do some crazy stuff, especially when hundreds of millions of dollars are involved.

Answer 3

The movie "Wall Street" was probably made around 1990. It starred Charlie Sheen and Michael Douglas.

In that movie they showed the importance of information and how that information moves stocks and the markets.

Information obtained from "inside sources" without including the rest of the investors, is usually illegal.

Proving it's illegality is sometimes difficult.

Several events were portrayed in that movie to show the viewer the importance of inside information, and when manipulated in a manner that gets a few "insiders" advantage to buy and sell within the framework of a short duration of time, the coup derived is thus deemed illegal and punishable under the full extent of the law.

Laws being lax, the inclination is for many to try this ploy knowing the outcome could get them terrific gains above the rest of the trusting and gullible public that invests for the "long haul".

"Insider trades" done with full knowledge of the Securities and Exchange Commission are not illegal, and offer investors information upon which they can make their investing decisions.

Usually when a C.E.O. of a corporation executes a large amount of options at a fraction of what it's company's stock is trading at, it alerts the investor as to that high ranking corporate officer's advantage over the rest of the shareholders. Although not illegal, this process puts everyone else at a disadvantage whereby they need to go through brokers and pay commission and have to pay market prices which are usually much higher than the stock options offered to high ranking corporate executives.

Much scrutiny is being taken over these "package deals" given to insiders, but for the time being, not much in the way of producing new laws to control this abuse.

Laws that confine corporate insiders to modest gains and pay packages comensurate with performance, should be enacted, and I would advise you contact your elected officials and plead with them to make this abuse of power come back to reality. (i.e. corporate executives were paid 300 times what the average workers was paid twenty five years ago, now it's over 500 times what the average worker is paid).

One more thought on this important subject.....

When stock options are issued, it dilutes the value of the stock, and that could be a problem if one looks at a stock for a long term gain. It is the same as when two individuals came up with the same winning lottery ticket and have to share four hundred million dollars.

You may notice that large corporations like G.E. don't see much movement in the stock because there are so many shares in play that it's practically impossible to get that stock to move a full point in either direction. Therefore, it's usually with smaller companies with fewer shares outstanding, and especially those with new or revolutionary products, that are most affected by insider information.

Answer 4

Yes it is illegal.
Esentially, it is someone that knows the inner workings of a company and makes stocks purchases/sales based on that knowledge. For example, a CEO knows his company is about to put out financial statements that show they have lost a lot more money than they thought they would. When this information hits Wall Street, the company's stock will likely fall. If he sells his stock or informs others of this information and they sell their stock, they would be guilty of insider trading.

The link below has a longer explanation and some other examples.

Answer 5

Yes it is illegal. It is where one person who has access to confidential information which will affect the stock price lets others know so they can buy more stock or sell their stock before the information becomes public.