Should Insider Trading Be Redefined In The Stock Market?

According to the SEC, over 4 billion dollars worth of penalties were issued to over 40 insider traders in 2017 (SEC Announces Enforcement Results for FY 2016). Insider trading is the trading of a public companies stock by an individual who has access to nonpublic information about the company. If insider traders try to capitalize on this information by buying a lot of the companies stock before it rises, then they are going to make large amounts of money with knowledge that the rest of the public will not have. This form of trading has been outlawed for years in the United States, but with so many large corporations and employees, it is impossible for any regulating body to stop every case of insider trading that occurs in this country. While

Legal insider trading should be redefined in order to make the stock market a market of equal opportunity for all citizens of the United States, instead if favoring the corporate employees. The SEC, or the United States Securities and Exchange Commission, is an independent agency of the United States Federal Government that was created by Franklin Delano Roosevelt on June 6th, 1934, to facilitate capital formation and help regulate insider trading. The SEC was created to help restore faith in a corrupt stock market following its fall in 1929. The SEC has made several great actions to help reduce the amount of insider trading and corruption in the marketplace since its creation, and its actions are seen in greater strength today. In 2016, the SEC set single year highs in several enforcement action categories such as having the most cases involving investment advisors or companies(160) in one year, and the most independent or standalone cases in one year(98) (“Insider Trading.”). These statistics not only show that the SEC is catching a large amount of corrupt traders yearly, but that the SEC is increasing in its activity in

Insider trading is defined as when corporate insiders buy and sell stock in their own companies, they must report their trades to the SEC (“Insider Trading”). The issue with letting corporate insiders trade within their own company is so many employees have the opportunity to inside trade due to the information gained at work that it becomes extremely difficult for the 4000 SEC employees to manage and regulate every stock purchase. This is seen in Menachem Brenner, Marti Subrahmanyan, and Patrick Augustin of N.Y.U and McGill university’s groundbreaking study. The professors examined hundreds of transactions, the largest study of its kind, from 1996 to 2012, specifically stock option movements, where an investor buys an option to acquire a stock in the future at a set price, to analyze the amount of insider trading that took place. The results found that almost a quarter of all public company deals include some form of insider trading(Sorkin). These results are disturbing, showing that the SEC and federal government are painfully behind in regulating insider trading in the stock market. The study also found that of the sample, the SEC mainly pursued only the largest deals, and pursued the punishment of famous public figures. These results show that the SEC is not able to manage the entire market or is simply not trying hard enough to do