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    Non-Public, Material Information: References

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    Mirel Leonard Tudor
    Insider trading involves trading stocks based on non-public information. Managers should not be allowed to profit from insider information before it is publicly disclosed. In the Pete Rose case, betting on his team to win may be acceptable if the game was not manipulated, but betting against his team or on its failure should face harsher punishment if manipulation was involved. For the Enron case, managers selling stock based on private information about the company's financial problems was unfair to other investors and should be punished. Managers with private information affecting a public company's stock price should be required to formally disclose that information through a press conference rather than just a public website.

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    Non-Public, Material Information: References

    Uploaded by

    Mirel Leonard Tudor
    39 views2 pages
    Insider trading involves trading stocks based on non-public information. Managers should not be allowed to profit from insider information before it is publicly disclosed. In the Pete Rose case, betting on his team to win may be acceptable if the game was not manipulated, but betting against his team or on its failure should face harsher punishment if manipulation was involved. For the Enron case, managers selling stock based on private information about the company's financial problems was unfair to other investors and should be punished. Managers with private information affecting a public company's stock price should be required to formally disclose that information through a press conference rather than just a public website.

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    Insider Trading Post

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    Insider trading involves trading stocks based on non-public information. Managers should not be allowed to profit from insider information before it is publicly disclosed. In the Pete Rose case, betting on his team to win may be acceptable if the game was not manipulated, but betting against his team or on its failure should face harsher punishment if manipulation was involved. For the Enron case, managers selling stock based on private information about the company's financial problems was unfair to other investors and should be punished. Managers with private information affecting a public company's stock price should be required to formally disclose that information through a press conference rather than just a public website.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    39 views2 pages

    Non-Public, Material Information: References

    Uploaded by

    Mirel Leonard Tudor
    Insider trading involves trading stocks based on non-public information. Managers should not be allowed to profit from insider information before it is publicly disclosed. In the Pete Rose case, betting on his team to win may be acceptable if the game was not manipulated, but betting against his team or on its failure should face harsher punishment if manipulation was involved. For the Enron case, managers selling stock based on private information about the company's financial problems was unfair to other investors and should be punished. Managers with private information affecting a public company's stock price should be required to formally disclose that information through a press conference rather than just a public website.

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    © All Rights Reserved
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    of 2

     What limits should there be on insider trading?

    In the USA, Pete Rose was a popular baseball


    player, and then manager, who was punished for betting on his own team to win. Should
    Pete Rose be allowed to profit from betting on the success of a team he managed? Should
    Pete Rose be punished more harshly if he profited from betting on the failure of a team he
    managed?

     In the Enron case, several managers sold all their Enron stock about an hour before it
    became public knowledge that the company was not worth as much as everyone thought.
    Should a manager be punished for acting prudently based on knowledge they have
    discovered honestly only because the public does not have that knowledge?

     Should managers be required to disclose private information they have that might influence
    the investment decisions of the public?  Also, address the question of timing about the
    dissemination of information: is it enough to share information on a public website or should
    a formal press conference be required?  

    According to Ganti (2021) “Insider trading involves trading in a public company's stock by someone
    who has non-public, material information about that stock for any reason.” The timing of the trade
    can make the jump from an illegal activity to a legal one and the other way around. If the trade
    happens at a time when the information was made public, it is legal, if not, this sort of insider
    trading practice can have radical consequences. I perceive the current limits to be fair. If the insider
    does not benefit from the esoteric attribute of the information behind a trade, there should be no
    issues whatsoever. Moreover, if that attribute is eroded through the publication of the given fact,
    then the trade should be legal, taking timing into account of course.

    For the Pete Rose example, betting on the success of the team he managed should be fine, if the
    result was not manipulated in any way. Similarly, for losing, even though betting against your team
    makes it hard to believe there was no outside influence pre-determining the result. In conclusion,
    considering how difficult it is to determine whether a game was rigged or not, both kind of bets can
    encourage skepticism, but the success of the team is more difficult to manipulate, so it seems
    somehow fair that profiting from betting on the failure of a team he managed should lead to harsher
    punishment if manipulation was involved.

    In the Enron case, if the information used by a manager is only known to people within the
    company, it is unfair to all the other stockholders, or potential investors. Not only are they taking
    advantage of the timing, which can make the difference between amazing gains, or catastrophic
    losses, but using confidential information for personal gain, should always be deemed unethical. To
    wrap it up, even if the information were ‘discovered honestly’ it is still unfair for the larger trading
    public, as that information would have a huge impact on everyone’s decision, and the manager’s
    profits are coming from the market sentiment which was at that point influenced by fake or
    outdated information. Hence, a manager should be punished if profiting based on non-public
    information.

    If managers are not bound by any confidentiality contracts, private information they hold that would
    affect the views around a publicly traded company, if true, should be disclosed. And the timing of
    that, should ensure the managers are not purposely doing it after they managed to take profits, to
    further make stocks plummet. Lastly, a formal press conference is required, as it would instill more
    confidence into the public, and will ensure the information is official and can be taken seriously
    when making a decision.

    References
    Ganti, A. (2021). Insider Trading Definition. Investopedia. Retrieved 3 May 2021, from
    https://www.investopedia.com/terms/i/insidertrading.asp.

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