The two sides of insider trading
Insider trading has negative connotations in the market. Ask someone in the market what he thinks of insider trading and chances are he will tell you a lot of negative things about this kind of trading. This should not come as a surprise though; there are a number of instances where insider trading was indeed the reason why some personalities were charged and jailed. Two well known names that were linked to insider trading include that of Martha Stewart and Paula Rieker of Enron.
Paula Rieker was a former Enron executive who was charged with insider trading. Records show that the former executive from Enron obtained 18,380 shares and this was then valued at $15.41 for every share. She then sold these shares for $49.77 in July 2001 and this happened a week before the general public was told of the $102 million company loss. Martha Stewart was another personality that was linked to this kind of trading and this happened in 2001. The two cases illustrate the fact that insider trading has an illegal side and this can lead to charges and jail time.
But is insider trading truly illegal? This is not always the case since insider trading can be legal as well. What is known as the legal type of insider trading is the kind of trading that happens when the corporate insiders of the company which include the company employees and directors buy and then sell the stock of their own companies. These transactions should then be recorded and these should be reported to the SEC. the illegal version of the insider trading happens when the buying and the selling of the stocks within the company breaches the fiduciary duty or the trust and confidence of those involved in the trades. There are some violations that may be involved here as well like the tipping of privilege information, trading of securities of the person tipped and the trading that was made by those who misappropriated the information.
