Insider Trading in US Securities Markets

One of the major difficulties in dealing with the problem of insider trading appears to be concerned with defining just what the practice is. One book on finance defines an insider as "a stockholder of a corporation who is also an officer or key executive" of the firm (Clark and Gottfried, 1987, p. 194). The authors go on to include, as insiders, professional traders, as opposed to the investing public. Another book defines insiders as "anyone who has knowledge of facts not available to the general public" (Nemmers, 1990, p. 232). This definition is said to specifically include corporate directors and officers, and other individuals holding 10 percent or more of a firm's outstanding equity stocks. This latter definition of an insider comes fairly close to that used by the SEC (Securities and Exchange Commission). For years, the SEC applied a "strict constructionist view" of what was considered to be insidertrading (Conner, 1986, p. 48). The following example illustrates this view of insidertrading:

. . . an airplane passenger who saw a factory in flames while aloft and rushed to the phone to short sell the stock when the plane landed violated

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986). Prior significant episodes of merger and acquisition activity in the American economy were primarily motivated by corporate diversification strategies, in which the principal goal was growth. By contrast, the hostile takeover (wherein the strategic goal often had little relevance to the primary business activity of the acquired corporation) characterized much of the merger and acquisition activity of the 1980sthe highest levels of such hostile takeover attempts which the American economy had ever experienced (Bina and Teixeria, 1989).  Many opinions have been expressed about the hostile takeover attempts. These opinions, however, may be distilled into two essential arguments. First, hostile takeover attempts should be restricted because they (1) waste corporate financial resources, and (2) managers' time. Second, hostile takeover attempts should not be hampered because restrictions on the activity would harm stockholders in their attempts to protect their interests against entrenched managements. Hostile takeover attempts, however, are not always initiated by unhappy longterm stockholders, or by corporate raiders. In some instances, a hostile takeover attempt may be made by another corporation which wants to acqui
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Some common words found in the essay are:
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Approximate Word count = 2356
Approximate Pages = 9 (250 words per page)

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