accounting question?

Question

Your friend has been telling you that she knows someone is a publicly traded corporation who gives her information that lets her know when to buy and sell stock in that corporation. Consequently, your friend has made quite a bit of money. She has offered to share these inside tips with you for a small percentage of any gain you may make as a result. Her offer is very tempting to you. Are these friendly tips ethical?

Answer 1

1. Insider trading of stocks is illegal.

2. She is lying.
She tells one person the stock will go up, and another the stock will go down. She will always make money no matter if the stock goes up or down, and can't lose, because she is not investing a dime. That is why she asks for a small percentage.

3. Nobody can predict what a stock will do.

Answer 2

Oh no, definitely not. That's insider trading and against the SEC rules. If caught both of you could get into deep trouble.

'Insider trading' can refer to two separate financial transactions--one being perfectly legal and the other being subject to massive civil fines and possible prison time. The legal form of insider trading involves the sale of securities or stocks by officers of a company or stockholders who own more than 10% of the company.

Any stockholder is free to buy or sell their shares based on public information about the company's current or future financial outlook. A company president can sell off his shares if news of an impending bankruptcy filing is announced in the Wall Street Journal, for example. The company president is considered an insider, obviously, but his decision to sell his stock was based on information any other stockholder could have discovered.

The illegal form of insider trading involves information NOT readily available to the rest of the stockholders. Whenever an individual becomes a major stockholder or a senior officer in a company, he or she must agree to keep certain events absolutely secret, even if these events could spell financial disaster for stockholders. The Security and Exchange Commission (SEC) watches for signs of insider trading whenever companies experience huge losses or gains.