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Moral Problems of Insider Trading

Insider trading is a form of trade that involves parties who have the advantage of access to materials and Information that is not available to the public. This form of trade has been regarded as unethical. This is because having information that is not known to others is an unfair advantage (Brenkert & Beauchamp, 2012). This paper discusses on the moral problems associated with Insider trading. It outlines the negative impacts that this practise has on trade and the society as a whole.
Ethical Issues
When parties with inside information participate against those without, there is a probability that inadequate market research is done. Despite the level of research that the outside party does, the level of information remains unequal. This discourages potential investors from participating and affects the market size. Investor confidence is a major factor in business growth because it determines the efficiency of the market. There is a high probability that when a market is influenced by insider trade, the knowledge influences decisions and this makes the market very variable. Variable markets are unstable and may not be reliable in the long term (Saylor, n.d).
Trade involves competition in which the best player gains. Perfect competition cannot be experienced in insider trading and this slows down the business world. This is because market research and analysis will not be adopted in growing business. It is a form of shortcut which encourages unfair competition. Using a firm’s information and material for a personal gain is like stealing. This is because the materials and information belong to the company. The beneficiary of these should be the company through the person and not the person through the company. This is unlawful according to the legislators (Brenkert & Beauchamp, 2012).
Viewed from the disadvantaged party’s point of view, insider trading is clearly wrong. No one would want to be in a situation in which they are less privileged; therefore it should not be applied if the general public finds it unacceptable. Trade involves the other persons free consent, if that is not the general public’s opinion then it is exploitation. It is obvious that people cannot trade with parties who have inside information out of their own free will. In most cases they trade because they don’t have a choice. It is wrong leave others with no choice but to trade with you (Brenkert & Beauchamp, 2012).
Capitalists argue that there should be justice in distribution of gains. This should be based on how much an individual has given to the society. Possessing inside information does not equal to contributing a lot to the society yet it places the person in a better position. This means that insider trading is unjust and only benefits some individuals. On the other hand, this practice is not acceptable based on the assumption that benefits should be shared according to the needs of the people. It does not necessarily mean that those with inside information are needier than the rest of the public. It simply favours them (Saylor, n.d).
Trade has power that affects the way in which the society and people operate. Decisions should be ethical and considerate of others; Personal gain should not be the driving force. In the case of insider trading, there is unjust advantage which has affected the society negatively. It has resulted to lack of interest in trade for some people who have the potential to invest. It is morally wrong to exploit investors as evident in cases where investors do not have a choice but engage in this trade.

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