Question

Alicia is an accountant for Winston Pharmaceuticals. Her duties include tracking research and development spending in the new product development division. Over the course of the past six months, Alicia notices that a great deal of funds have been spent on a particular project for a new drug. She hears "through the grapevine" that the company is about to patent the drug and expects it to be a major advance in antibiotics. Alicia believes that this new drug will greatly improve company performance and will cause the company's stock to increase in value. Alicia decides to purchase shares of Winston in order to benefit from this expected increase.

What are Alicia's ethical responsibilities, if any, with respect to the information she has learned through her duties as an accountant for Winston Pharmaceuticals? What are the implications to her planned purchase of Winston shares?

Answer 1

Alicia's ethical responsibilities in such a scenario would be to not try to make personal gains by acting on insider information by purchasing new company shares. She should act responsibly and focus on her job as the company accountant.

Alicia as the accountant of Winston Pharmaceuticals is someone who is very closely related to the financial aspects of the company as well as tracking research and development of new products. As such, purchasing shares of the company based on the confidential information that Winston Pharmaceuticals is about to patent a major drug, will be both unethical as well as illegal. Unethical because Alice will be taking undue advantage of her position as the accountant of Winston Pharmaceuticals and profiteering from the purchase of company shares. Similarly, it will be illegal as it will be considered as insider trading. The implication of insider trading will be that she may have to face a prison sentence including civil and criminal fines.