Poll: What Is the Extent of Illegal Insider Trading in the Financial Markets?
What is the extent of illegal insider trading? The intangible nature of the activity makes it difficult, if not impossible, to measure. But what can be measured is investors’ perception of the pervasiveness of insider trading.
When we asked investors this question in our CFA Institute Financial NewsBrief survey, the results were disconcerting: 35% of the 832 respondents believe insider trading is widespread, whereas only 15% think it is rare. Perhaps unsurprisingly, many respondents think the extent of insider trading lies somewhere in the wide range between these two extremes.
Investors who possess material price-sensitive information that they should not act on have an unfair advantage over other investors. Inevitably, this advantage reduces investor confidence in the fairness of markets and in the ethics of market participants, thereby undermining the market mechanism. CFA Institute’s position on insider trading, as outlined in our Code of Ethics and Standards of Professional Conduct, is clear: “Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.”
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