Insider Trading Research Paper Example | Topics and Well Written Essays - 250 words

Insider Trading - Research Paper ExampleIn Martha Stewart case, Martha avoided a loss of $ 46000 by sell her shares which is duly covered by the fine she was subjected to Moreover, she lost a great deal of money as a tradeoff for her legal troubles. Furthermore, Martha Stewart Living Omnimedias stock price fell and Martha was banned to serve as an officer or director of a public company for five years. Peter Bacanovic, on the other hand, was barred from working in securities industry along with a $ 75000 fine. These penalties are enough to set an example for the public.SEC can and should take measures to sustain such incidences before their occurrence. They can do so by eliminating the opportunity to insider trading because no matter what the penalty, such violations are very appealing to tribe as their upside is extremely lucrative. Research shows that the certainty of punishment, rather than its severity, as well as how particular punishments are perceived, that most greatly imp acts whether criminal sanctions pose a potent message to would-be lawbreakers (Berman, 18). Control person provision suggests certain internal controls that would raise the bonding cost. By subject bonding costs, a firms cost of capital will be reduced. Insider trading leaves behind agency cost and since investors cannot detect insider trading within a firm, they submit a discounting method to value the firms stock that leads to a raise in the firms cost of capital. So in essence, incurring bonding cost would reduce the cost of capital which would send a strong signal to the investors that the firm has taken extraordinary measures to control insider trading. So in short SEC should impose the control person provision which would encourage the application of internal