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Assignment 2

The document discusses insider trading laws, defining insider trading as the buying or selling of securities based on material, nonpublic information. It highlights the legal risks, reputational damage, and ethical dilemmas businesses face due to insider trading, as well as the importance of these laws in protecting market integrity and investor confidence. The paper emphasizes that while some insider transactions are legal, illegal insider trading can lead to severe penalties.

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harshvardhanparmar0804
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35 views7 pages

Assignment 2

The document discusses insider trading laws, defining insider trading as the buying or selling of securities based on material, nonpublic information. It highlights the legal risks, reputational damage, and ethical dilemmas businesses face due to insider trading, as well as the importance of these laws in protecting market integrity and investor confidence. The paper emphasizes that while some insider transactions are legal, illegal insider trading can lead to severe penalties.

Uploaded by

harshvardhanparmar0804
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Batch 2023-26

White Paper on Legal Business Issues


Insider Trading Laws

Harshvardhan Parmar, Lakshya Agrawal, Tanshq Rathod


Business Law
Prof. Harish Bapat

Paper Due Date


Jan 05, 2025
2025

Insider Trading Laws


Insider trading is the buying or selling of a company's
securities by individuals who possess material,
nonpublic information about that company.

Insider trading—the practice of buying or selling a


company's securities based on material, nonpublic
information—has long been a contentious issue in
financial markets. While the term often evokes images
of corporate executives secretly profiting from inside
knowledge, the reality is more complex. Some forms of
insider transactions are perfectly legal, while others
can result in severe criminal penalties

Introduction
Key Takeaways
Insider trading involves buying or selling a publicly traded company's stock based on nonpublic,
material information about that company.
Material, nonpublic information is any undisclosed information that could substantially impact
an investor's decision to buy or sell a security.
Illegal insider trading carries severe penalties, including potential fines, prison time, and other
penalties.
Insider transactions occur all the time and are legal when they conform to the rules set forth by
the U.S. Securities and Exchange Commission (SEC).
The SEC requires insiders to file reports of their trades, which are publicly available.
CHALLENGES BUSINESSES FACE DUE TO INSIDER TRADING

1. Legal Risks and Penalties 2. Reputational Damage 3. Ethical and Cultural


Dilemmas

Businesses are held liable for Insider trading scandals erode A company involved in insider
insider trading by their trust among investors, trading cases may face internal
employees or stakeholders. customers, and stakeholders. A ethical issues:
Regulatory bodies like SEBI tarnished reputation can result Employees may lose trust in
(India) or SEC (USA) impose in: leadership.
strict penalties, including hefty ·Lower investor confidence. It creates a toxic work
fines, lawsuits, and bans. ·Difficulty attracting capital or environment where unethical
partnerships. behavior is normalized.
·Negative media coverage.
WHY INSIDER TRADING LAWS ARE IMPORTANT

1.Protect Market Integrity 2. Safeguard Investor 3.Encourage Ethical Business


Confidence: Practices:
Prevents unfair
advantages and ensures a Transparent markets attract Holds individuals and
level playing field for all more investors and foster trust companies accountable for
investors. in the financial system. their actions, deterring
unethical behavior.
Thank You

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