Insider Trading
PRESENTED TO: MR. ISRAR K. RAJA
Insider Trading
The term Insider Trading means that “ the illegal practice of trading on the stock exchange to
one's own advantage through having access to confidential information.”
Insider Trading
Insider trading is the trading of a public company's stock or other securities by individuals with
access to nonpublic information about the company.
Members of an organization
purchasing a security.
Professionals who do
business with the
corporation.
Friends, family, and
acquaintances of corporate
employees.
Government officials.
Hackers, corporate spies,
and other thieves.
Consequences of Insider Trading
 Authorities for the punishment of the insider trading are:
 U.S. Securities and Exchange Commission (SEC)
the Financial Services Authority.
Securities and Exchange Commission of Pakistan (SECP).
The consequences of Insider Trading can be quite harmful for the individual or the company involved in.
It can be imprisonment, charges of civil or criminal activity and several more depending on the
situations.
After some new amendments the new penalties or sanctions are:
 The maximum prison sentence for an insider trading violation is now 20 years. The maximum criminal fine for individuals is now
$5,000,000, and the maximum fine for non-natural persons is now $25,000,000.
 The Company faces a civil penalty not to exceed the greater of $1,000,000 or three times the profit gained or loss avoided as a
result of the violation.
How to control Insider Trading
There are several steps to follow in order to stop Insider Trading.
These steps or instruction isn’t declared by any authority or organization but it can be followed
by the corporation/firm or any individual, these instructions include:
Restrict risky trading.
Appoint an in-house watchdog.
Ensure that your employees are educated on insider trading.
Act quickly to investigate insider trading.
Leverage technology to prevent insider trading.
Impact in our society
As a developing country, Pakistan’s Stock market should be rich of capital and profit in their best
ratio.
If insider trading occurs, its impact will be bad for every related to market’s growth exchange
related persons.
Insider Trading affects the integrity of the market and the whole stock
This type of trading results in lesser capital from the investors as they are investing too much
and others get double profits than them though insider trading.
Suppliers also lose faith because their expense and profits aren’t that good as the person who is
involved in insider trading.
This whole scenario can lead into recession. Which isn’t a good thing for Pakistan’s weak
economy.