1. Explain the pros and cons of insider trading laws. (One full page is required in...

1. Explain the pros and cons of insider trading laws. (One full page is required in your own words)

2. Explain the regulations of insider trading laws.

Expert Solution

1. Insider trading has been introduced by serbanes oxley act in order to protect from any kind of manipulation of the price by the insiders of the company because they are having access to the private sensitive information of the company and they have the capability of manipulating the process to the largest and because they are already knowing about the effect of these positive and negative price sensitive information on the share price of the company and it can lead to manipulation of the interest of the share holders.

Insider trading has been advantages because it is trying to control the fraudulent activities by the management in the market by trading the shares and taking the undue advantage whereas it is also trying to protect the interest of the shareholders and retailers in the market and have a control over the fluctuations of the share price through known information.

Disadvantages related with insider trading are that it is regulating the insiders to a large extent and it can hamper the performance of the company because it can also promote unnecessary and illegal positioning of these board of directors and other relatives because they cannot be completely controlled as the relatives are specifically defined within the law so they can conveniently manufacture their trades and manipulate the the existing prices in share market.

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