Insider Trading: Understanding Legal Framework And Consequences

What is Insider Trading?

Discuss about the Insider Trading for Legal Framework.

Many experts have notably dealt with this information and have released the common definition of Insider Trading which not only makes it illegal but also highly condemned on all ethical and moral grounds.  The legal framework which incorporates this particular activity sets out very fine lines between what not to do and what makes this activity highly inappropriate in all companies around the world, this specific view point about the activity is coherently shared as an ideology by every company around the world. (Coffee, 2013) The definition of Insider Trading can be defined as the selling or leakage of confidential documents and information which contains the company’s financial records, these records can be used by the share holders of the company or even the rival’s ones to either sell or purchase more share. This activity has been deemed illegal specifically for the companies that have nonpublic shares and do not ever wish to disclose this information into even the company’s board of directors. The legal ambit of Insider trading continues with insider information, the companies which emit out their financial records have different transactions from the company’s board of directors, these exchanges of money are also visible to the general public and hence continue with the process. (Denis & Xu, 2013)

1. The First case incorporates and consist of Mr. Hill and Mr. kamay to be a part of an insider trading and depending upon the value of profits earned by the applicant i.e. Mr. Kamay the judge was keen enough to rule against him depending on his profits earned which crossed many scales and making the case amongst the highest illegal profits earned in the Country. (Agrawal & Cooper, 2015) The judgment in this particular case has been entirely focused upon the applicants meeting and coordination with Mr. Hill whereas the applicants claim that the notion was to be put forward in a way which shows him less of a culprit rather than having the entire sentence alone for all the trades which were carried out. Mr. Lucus has been sentenced to around 7 years in Jail.

The second case revolves around Mr. Curtis and Mr. Hartman who were working in the same company and the financial department of the company. Both of these clients have been charged with multiple accounts of insider trading, a number which have been resulted to more than 50 trades being carried out however the judgment presented in this case because Mr. Hartman was the shot caller mainly and his more than profane intentions towards having as much as profit and using Mr. Curtis as the initial pawn resulted in their illegal endeavors. The judge has given the applicant, which is Mr. Curtis only 2 years in Jail with no bail accepted.

Cases of Insider Trading in Australia

2. The overall grounds through which the applicant namely Mr. Lucus appealed to the court were on the basis of emphasis and priority in the court. His case boils down amongst the most serious Insider Trading case in Australia and hence he felt that this took quite the lime light in making the decision easy for the judge. He constantly anticipated and focused the subject of appeal on the fact that the profit of almost 8 million dollars was largely focused by the judge whereas the 4 big accounts of Insider Trading were not considered at all. The second demand and footstep which lead towards the applicants appeal was that the judge did not interpret enough information and stance of his partner in crime which results in his unjust sentence towards 7 years of imprisonment which would be without parole. The third appeal ground made by the applicant was that how the judge did not consider any of this self actualization of remorse and self surrender which takes into accountability of quite voluminous returns and should have lowered his sentence because of his asset declaration. To pull the curtain on, despite all these appeals, they were negated and rejected by the judge and Mr. Lucus was sentenced to imprisonment without parole.

3. The principal of Parity deals with the fundamental phenomenon of acting out as the principle of every legislature and law enforcing facilities in the state. The fundamental principle of the principle states that every person is equal in front of the law and people convicted in two states and in a same criminal activity are to be dealt with different principles and hence should be acted out as this principle. (Langevoort, 2013) Many panelists have suggested that how a panel of usually 5 judges is seated to view both cases and if the co offender is also found guilty, he or she must be given the sentence with the primary offender at the same time. However during years this has evolved into another practice of appeal which makes the principle of Parity become more deteriorated and focused entirely on the benefits of the practice. The appeal procedure if in proper continuation and goes through acceptance procedure by the judge from the Offender in the first place, than the principle and the law at the same time allows for the co offender to be called in and put into a separate trial from the same judge. This ensure that how this system works cordially for the advantage of the people and goes through all the procedures with complete transparency so that the general public know how this has been designed only to ensure the best of benefit.

Principle of Parity

4. The active role of many people inside the industrial complex and with huge profit returns influx flowing into the markets at an abnormal rate creates a viscous cycle amongst the people to obtain more wealth at a faster pace. This makes the impact of different means, which are often adopted by people to pursue their advancements in the business worlds and help them to establish their names in the franchises. However the acts of Insider trading and information has left a back door entry into these ways and attracted a lot more crowd to be mesmerized by these acts, The information leaked helps the people into attaining more stocks and make active trades in the markets by assuming first the condition of the company’s finances and its legal stand about. This information contains different amounts relating the company’s ownership of different properties and areas for business or personal purposes. (Agrawal & Nasser, 2012) Australian bureau of Law enforcement has seen many large amounts of transactions which have resulted in people going to jail for more than 7 and 10 years which is the maximum of imprisonment. The Security Council’s have now introduced and proposed new policies which would not stop this crime but also help to regulate a policy which could be implemented for the betterment of confidential information of large scale industries. The two adjustments which have been made by the Security Council to stop this verdict are as following

• The trader could be allowed in the exchange of stocks and information if he is fully sure about the information being nonpublic (Gao et al. 2014)
• The trader when exposed to information about the non public entity would be held liable and responsible entirely of maliciously using the private information for his own content and privilege in trading. (Brockman et al. 2014)

These laws and rules have now been under circulation by The Australian law departments and the Security Council, they have been under constant debate as to ensure only the best amount of protection is to be provided.

5. The question for offence for this specific activity arises because of the civic duties and responsibility the state holds for major companies which actively take part in the progression and betterment of the state. The fact that how inside people leak information so that active trades could be made easily? Many companies which provide different amount of services to the people and the state deserve this valuable information to be left private and out of public reach, the very fact that this information if released so that everyone starts to benefit is a serious offence. (Ryan et al. 2015) This crime should be dealt with strict measures so that it could be avoided by people even having the thought of this. The crime in its all entirety consists of two or more people who earn large amounts of profits in the stock markets by evaluating the returns and calculating the profits which help in money making schemes. The state as an institute of trust has to be held liable in these cases and should enforce such precautionary schemes to help all the people and companies suffering from this crime. Insider trading must be stopped or controlled within the companies because one way or the other, they are really affecting the integrity of the company. Employees need to be very careful while working because there might be some confidential information which you are sharing with other people and that is not meant to be shared. So, insider trading should always be avoided while being a part of the company. We have seen and learnt from these case studies about the consequences of doing insider trading!

References

Agrawal, A., & Cooper, T. (2015). Insider trading before accounting scandals.Journal of Corporate Finance, 34, 169-190.

Agrawal, A., & Nasser, T. (2012). Insider trading in takeover targets. Journal of Corporate Finance, 18(3), 598-625.

Brockman, P., Tresl, J., & Unlu, E. (2014). The impact of insider trading laws on dividend payout policy. Journal of Corporate Finance, 29, 263-287.

Coffee, J. C. (2013). Mapping the Future of Insider Trading Law: Of Boundaries, Gaps, and Strategies.

Denis, D. J., & Xu, J. (2013). Insider trading restrictions and top executive compensation. Journal of Accounting and Economics, 56(1), 91-112.

Gao, F., Lisic, L. L., & Zhang, I. X. (2014). Commitment to social good and insider trading. Journal of Accounting and Economics, 57(2), 149-175.

Langevoort, D. C. (2013). Fine Distinctions in the Contemporary Law of Insider Trading. Colum. Bus. L. Rev., 429.

Ryan, S. G., Tucker, J. W., & Zhou, Y. (2015). Securitization and insider trading. The Accounting Review, 91(2), 649-675.