The Securities and Exchange Act of 1934

One ethical issue that arises from insider trading is the possibility of creating a conflict of interest between a company’s interests and the personal interests of its directors or executives. For example, if an executive were to purchase large amounts of his or her own company’s stock knowing that it was about to increase significantly in value due to an announcement or event coming up soon (such as an acquisition), then this would be considered unethical because it could create unfair advantages over other investors who do not have access to such inside knowledge. Another ethical concern when it comes to insider trading is that those with privileged information may use it for their own benefit rather than using it in the best interest of the company they represent or shareholders they oversee. This kind of behavior could lead to potential losses on behalf of shareholders who are unaware these trades are taking place (Khan et al., 2019). Furthermore, if news about these trades were made public before being reported officially by the SEC then this would also be considered unethical as well since prices could fluctuate dramatically before accurate market values have been established. Finally, even though insider trading can sometimes bring positive results for companies by providing extra capital during periods where external funding may not be available (such as M&A activities), there must still remain safeguards in place so that any buyers and sellers involved have full disclosure regarding all relevant information related to any proposed transactions (SEC Investor Education Office 2018). Without strict oversight from regulators these types deals pose too great a risk both financially and ethically speaking. What measures should companies take internally when dealing with employee stock purchases?

Sample Solution

When corporate insiders want to buy or sell shares in the firm where they work, there are many ethical issues that arise. The Securities and Exchange Act of 1934 limits, but does not prohibit, corporate insiders from trading in their own firm’s shares. Although insider trading is illegal in some countries due to its potential for abuse and manipulation of financial markets, it can be beneficial for companies if done legally.