Should insider trading be legal? Why or why not?

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Expert Solution

The insider trading is an illegal practice of selling, buying and access of private stocks or securities by the access to confidential information.
Even though insider trading is declared to be illegal by the law, it cannot be completely eliminated as it benefits the Economy in some aspects too.
Some of the drawbacks of insider trading are:-

1. Insider trading disrupts the market fairness and order.

2. It leads to a loss of faith in a particular market by the Investors which make them discouraged to invest.

3. They increase the risk of stock market crashes.

Some of the advantages of having insider trading include:-

1. Insider trading indirectly compensates employees which will in turn increase the stocks in the market.

2. It is an incentive to an innovation.

3. It discloses relevant information as soon as possible for more efficient contribution to the markets.

4.It promotes market efficiency and balances the stock prices.

Rahul Sunny answered 1 year ago

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