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Why insider trading could be wrong

On Behalf of The Law Firm of Brent D. Ratchford |

Insider trading is a white-collar crime that you may have heard about in North Carolina, but you might not know what it entails or why you should care. Insider trading is when someone who has access to non-public information uses this knowledge for personal gain by selling their stock before the public announcement of that new information.

Insider trading is hard to detect

Insider trading can be difficult to prove. The person involved could have many reasons for selling the stock at that time, making it seem like an innocent coincidence.

It is unfair

Insider trading is unfair because the people who use insider information are not playing by the same rules as you. You could lose out on big opportunities to buy or sell stock at a time when you should be able to do so, but they would already know about it and acted accordingly in advance.

Insider trading hurts you

Insider trading could be wrong because it drives stock prices down. If a business executive has access to information that you don’t, they might sell their shares first and drive the price of your stocks lower. You may lose money as a result.

It discourages people from participating in the stock market

Insider trading could have a snowball effect. If you do not know when you should buy or sell your shares, you might get discouraged from investing in the future and that would hurt our economy as a whole. That means that companies would not be able to get the capital they need and you would not be able to make as much money.

Over the years, you may have heard about insider trading and its possible consequences. Granted, this kind of trading is a white-collar crime that lawmakers need to take seriously.