Business Studies

Which of the following ethical issue is related to finance?


ANSWER

Insider trading


SOLUTION
Insider trading is a word that has many definitions and connotations and which includes both legal and illegal activities. 

It can also be described as an insider trading of a company’s stock, securities, bonds and stock options by persons with possible access to non-public information about the company. 

Nevertheless, insider trading can take place lawfully every day, when trading by the corporate insiders such as officers, directors, employees and large shareholders to buy or sell stock in their own companies if this trading will not be taking advantage of the non-public information and also be within the boundaries of the company’s policies and the rules governing this trading. 

However, the term “insider trading" is mostly used to describe a practice in which an insider party trades based on non-public material information gained through the performance of the insider’s obligation at the company, in violation of other relationships of faith and assurance or otherwise when the non-public information was stolen from the company. 

In other words, insider trading is buying, selling or dealing in securities, bonds, and stocks of a company by a director, manager, or employee of the company who has confidential information that is not accessible to the public.
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