IT management on: Case 2 Hannes knew of TNT valuation
Introduction
It is very clear that Insider trading happens when an insider utilizes non-public and material information about the company in the securities trade. Generally, this kind of activity is restricted by the SEC (Carlton, Dennis & Daniel, 1983). Insider trading explains transactions in security like shares and stocks by individuals who have right to the confidential information and which is not available to the public and make a gain from this type of information. In simple words, insider considers to the person who obliges a fiduciary responsibility in regards to the company and its shareholders.
The people who are in favor of insider trading believe that some companies will permit their insiders to utilize confidential information to execute their innovative and entrepreneurial activities. But this argument is strongly challenged by the people who are not in the favor of insider trading. People who are not in the favor of insider trading claims that letting companies permit their insiders to work on confidential and private information may lead to the agency problems which shareholders would not be able to resolve. No Companies must be authorized to permit insider trading in the business of the company because generally shareholder is not able to monitor the actions of its insiders (Brickley & James et al, 2000). It has been examined from the article Hannes knew of TNT valuation that director of Macquarie Bank was standing in the front of the court because of the involvement in the insider trading. In fact crown has claimed that, Hannes had used confidential information to make about $2 Million profit in options of TNT during the takeover offer in year 1996. This show that executive director of the Macquarie Bank had used confidential information about the takeover offer which is normally restricted by the securities regulation. Conventionally, most of the insider trading regulations has been related on the fact that they disregard the principle of fairness which needs a playing arena in that no investor can misuse received informational advantages (Easterbrook & Frank, 1981). This can be considered as legal perspective of the insider trading that examines trading on the foundation of material information.
It is also viewed that fiduciary principle aims to enhance confidence in place of the market by eliminating the unfair benefits which the insiders have because of accessing to private and confidential information. It understands the duties of insiders not to make benefit of their power by utilizing information for own gain. This principle is breached in the case of Macquarie Bank because executive director of the Bank had used confidential information about the options of TNT to make a gain of about $ 2 million in trading during the takeover in 1996.
On the other side, market fairness perspective aims to enhance faith in place of the market by punishing unfair benefit made by any individual in the place of the market with access to private information (Haft & Robert, 1982). This perspective is also breached in the case of Macquarie bank because executive director of the Bank had tried to make benefit by using of the confidential information in relation to the takeover.
On the other side, the approach of free market is related mainly on the argument that the insider trading increases efficiency of the market by encouraging insiders for trading as compared to abstaining them, this allows markets to obtain new information. Moreover, advocates of the free market approach have recommended that the insider trading may also work to confirm corporate disclosures by working to make their accuracy (Brickley & James et al, 2000). Advocates of the free market approach have argued that the insider trading enhances the efficiency of place of the market by motivating insiders for trading as compared to restricting them. In fact, people who are in the favor of insider trading stated that insider trading can be beneficial and helpful because it offers an extra incentive to the management to become more entrepreneurial in managing the organizations which they control. In fact, some companies shall permit their insiders to utilize confidential information to execute their innovative and entrepreneurial activities. Another argument for insider trading is it works as the price accelerator and maintains the securities price to their level. At last, it can be said that supporters of the free market theory proves the deletion of the legislation in relation to the insider trading by saying that insider trading increases the market efficiency and allows marketers to receive more information.
Conclusion
At last, according to my opinion Insider trading cannot be accepted as the means of information which is brought to the place of market quickly and efficiently. In my opinion, insider trading can be considered as harmful and victim to the place of the market (Fombrun, Charles & Cees, 1997). In case of, Macquarie bank whatever the executive director did was against the principles of fiduciary and market fairness. In general, using of the confidential, private and non-public information breaches the regulation of SEC. In case of Macquarie Bank, Hannes also breached the laws and regulation in against to insider trading. It is advisable to each and every insider that they should maintain the private and secret information of the Company from outsiders. It is advisable to the Companies that they should follow the fiduciary principle in the well manner for enhancing the confidence in the place of the market by eliminating the unfair benefits.
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