In 2011, a stock trader of a well-known investment firm along with two alleged accomplices was convicted of insider trading. The lawyers allegedly browsed around their law firm picking up information regarding corporate deals and would provide it to a person who would then pass the inside information to the trader. This information was then used by the trader for him to earn millions of dollars. Since the information came from the lawyers, the trader would thank them by providing envelopes filled with cash.
II. Central Problem
Screening out the potential bad stock traders and only those stock traders with good values and can be trusted with confidential information are selected. Find a way to control the behaviours of those already in the firm who are prone to engage in inside trading.
The firm shows that they have a poor system in selecting employees since unethical employees are able to enter their company. They also possess poor security regarding with the works of their employees that is why most probably some employees are able to do insider trading. And lastly there is limited communication between top management and the employees which lead to this kind of behaviour by employees.
Due to the alarming case of insider trading we recommend that the firm should strengthen their employee selection program in order to select the right personnel with ethical values. With this improved selection program, top management would be able to identify who should be selected and who should be not.