Foundations of Business - Research Paper Example

Violation of insider trading also comprise of ‘tipping’ such information and misappropriation of information. There are various cases of insider trading. The employees, officers and directors of corporate traded the securities of company after learning the confidential report of the company. Friends, family members and business associates of the corporate officials may trade the securities after receiving hidden information. The securities can also be traded by employee of banking, law and brokerage who are provided such information.

The government employee can trade the securities by learning such information from their employment (U.S. Securities and Exchange Commission, 2001). 2.0 Types of Transactions Considered Insider Trading Regardless of Their Legality The information of the company is not disclosed to the public until the appropriate time. If the employees or officers in the company disclosed the material to the public before company does, then it will affect the stock price of the company. The material may be positive or negative but is illegal to disclose to the public and it may result to the violation of the policy of company.

The transaction must not take place until the next business day after the exposure of material information. The transactions which are prohibited in the company are transaction in company securities and transaction in the securities of other companies. In company securities transaction, an employee is aware of the materials and non-public information about the company. He is required not to be part of certain activities of the company. Company securities’ trading must not be done, i.e. purchasing or selling company securities.

He must not advise the public to buy, hold or sell the securities of the company. The employee should not disclose the information of the company and must not guide or help anyone in any of these activities. Transaction is valid in case of emergency for raising money which is not an exemption to the prohibition made on insider trading. In other companies’ transaction in securities, an employee is aware of the non public information of other companies because of their jobs. He is not supposed to trade securities of other companies, which is the violation of other companies’ policies (Heckmann Corporation, n.d.). 3.0 Specific Conditions under Which Insider Trading Is Considered Illegal under United States’ Federal Securities Laws The laws of Federal securities prohibit insiders from benefiting from the information which have not been provided to the public.

The laws do not provide permission that the member in public market should have equal information; rather it focuses upon the fact that certain persons might use their position to attain undue informational advantage over others. Under US Federal securities laws, it is unlawful for every person whether ‘directly or indirectly’, by using any methods or ‘instrumentality of interstate commerce’, by means of mails or any facilities of national securities exchange in order to perform various activities.

A person should not employ any scheme, mechanism or artifice to defraud. He should not make any false statement of a