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Morgan Stanley Case Summary: Ethical And Legal Issues In The Financial Industry

944 Words4 Pages

Assessment 2-Case synthesis: Morgan Stanley 1.Basic empirical facts of the problem Financial industry, the most scrutinized sector owing to the oceans of information involved and dynamic trades conducted, has generated a heated debate regarding ethical and legal issues where loopholes can be utilized by self-interest driven individuals to achieve illicit gain. As a result of the characteristic that large amounts of material and nonpublic information is contained in daily trade, it is not rare that interest-motivated insiders may make use of the access to the formation to conduct insider trading. Insider trading is defined as trading of securities in possession of relevant material, nonpublic information, in breach of fiduciary duty (U.S. …show more content…

Compliance officials are supposed to make use of information and IT surveillance system to terminate insider trading timely. Moreover, mechanisms such as “window period”, during which insiders are forbidden from purchasing certain stocks, should be put into place to develop an overarching compliance system. 3.4. Strengthen government supervision and law enforcement The stricter regulation enforcement including increasing penalty and longer jail terms would play an irreplaceable role in deterring insider trading. Further, compulsory timely disclosure of inside information could be an alternative enforcement since inside information is only valuable before being made public (Zhang, 2014). In conclusion, various recommendations have been mentioned, which require financial institutions and government to cooperate and establish more sophisticated detection and prevention system. Although this might be resource-consuming, considering the significant harm brought by insider trading, it is more reasonable to focus on cost-effectiveness. Furthermore, in-depth research would be carried out in terms of insider’s ethical standards, the origin of insider trading. (Word count:

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