Both federal and Washington state authorities can charge you with insider trading violations. But not everyone agrees that this white-collar crime should be illegal. Instead, many advocates argue that insider trading harms no one and may even benefit the market. The opposing argument focuses on the potential ethical violations involved in the crime.
Arguments for keeping insider trading illegal
Some believe that the status of white-collar crimes, such as insider trading, should remain illegal due to the ethical problems that they present. Primarily, they express the belief that insider trading violates a fiduciary duty, which refers to the duty that a third party holds towards a beneficiary. Those against insider trading argue that anyone who sells based on insider information prioritizes their own interests above the shareholders, which in turn violates the fiduciary duty.
Other ethical problems frequently cited include insider trading:
- Demonstrates a lack of fairness
- Promotes a form of theft
- Causes harm by increasing economic inequalities
- Involves deception
Reasons to legalize insider trading
Other advocates argue for the legalization of insider trading.
The arguments for legalization involve the following:
- The crime leaves behind no victims.
- Insider information may benefit the investor.
- The law finds it difficult to differentiate between insider trading and proprietary information.
- Not every case of insider trading gets the same treatment.
A considerable argument for making insider trading legal involves the idea that forbidding the action only increases investment errors. By preventing an insider from buying a stock, investors experience a delay in the information that may influence them to purchase a quality stock.
While arguments exist both for and against insider trading being legal, the current law enables charges to be filed against you. You may face both prison time and thousands of dollars in fines if convicted.