A large insider trading case was finally closed this month with a sentencing of 39 months in prison for Stan Grmovsek. He and his friend from law school had spent the past 14 years making $9 million through insider trading. They would use information from their jobs at law firms such as Sullivan & Cromwell and Dorsey & Whitney LLP to make deals in both Canada and the United States.
There are some that argue for insider trading such as Milton Friedman, a prominent economist, who said, “You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that.” However, the reason that insider trading is unethical is that those people use the important information to their own advantage and to the disadvantage of outside investors. This can damage a corporation’s reputation and, more importantly, reduce confidence in the securities market in general.
Whether a person is making money off of a new stock or saving money because they found out a company is going to bankrupt and sold before it became public knowledge there is someone out there who always loses.