Ethics Insider Trading the Ethics Essay

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Speculating has become such a common practice in the stock market that it is an essential element of a proper stock market. It is doubtful that the stock market values would be anywhere near its current value if not for speculation.

Goldman Sachs Investigation

The Goldman Sachs investigation inquires into whether traders at a number of hedge funds and trading firms, improperly gained nonpublic information from Goldman Sachs (who gained the information from industry informants) about pending health-care, technology and other merger deals.

In the Goldman Sachs situation, certain traders benefited from privileged information of impending mergers by buying stock on those mergers before the merger was officially announced.

Thus, they were able to acquire a promising stock at a lower price than they would have otherwise.

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They profit by selling the stock after the merger announcement induces other traders to buy the stock and push the stock price up.

According to Werhane, the wronged parties here would be: 1) the other traders who did not get the opportunity to buy the stock at the price the insiders did; 2) the traders holding the stock if/when the stock price decreases. According to Manne's reasoning, none of these parties were wronged because they should have based their decisions on their understanding of the fundamental value of the stock, not their understanding of market trends, or how other traders will act......

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