Insider Trading and Martha Stewart

Martha Stewart, homemaker turned media mogul, spent time in 2004 and 2005 in jail for illegal insider trading. While insider trading is not necessarily illegal if reported properly, more often insider trading is done in a fraudulent manner. This paper will examine insider trading and discuss the Martha Stewart case in regards to fraudulent insider trading. Insider trading is when corporate insiders such as officers, directors, or holders trade more than 10% of the corporations stocks or securities (wikipedia, 2006).

Insider trading is legal as long as the transaction is reported to the Securities and Exchange Commission (SEC) and not based on material non-public information.

Insider trading is illegal when a corporate ‘insider’ is misappropriating private information, and trading on it or secretly relaying the information (wikipedia, 2006). Illegal insider trading is considered a violation of trust to the shareholders and destroys the level playing field for all investors to make decisions based on the same information.

In the Martha Stewart case, Stewart received information from her friend Sam Waksal that his company, ImClone’s cancer drug had been rejected by the FDA before the information was made public (Rasmussen, 2006).

Get quality help now
writer-marian
writer-marian
checked Verified writer

Proficient in: Charles Manson

star star star star 4.8 (309)

“ Writer-marian did a very good job with my paper, she got straight to the point, she made it clear and organized ”

avatar avatar avatar
+84 relevant experts are online
Hire writer

The rejection by the FDA caused ImClone’s stock to drop sharply. Before this news was made public, Martha Stewart had her stockbroker sell her 4000 shares of ImClone. The ‘inside’ information saved Stewart a lot of money when she sold her shares premature of the bad news going public for ImClone.

The Martha Stewart verdict was justified because Martha was not forthcoming with the information she knew and her motives to sell the stock.

Get to Know The Price Estimate For Your Paper
Topic
Number of pages
Email Invalid email

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy. We’ll occasionally send you promo and account related email

"You must agree to out terms of services and privacy policy"
Write my paper

You won’t be charged yet!

Martha and especially her stockbroker knew they were taking advantage of what seemed like ‘lucky’ information. Although Martha felt like a scapegoat, there are many others that have probably committed the same crime of insider trading and hopefully this case has helped deter further violations of the law in the future.

Updated: Mar 11, 2022
Cite this page

Insider Trading and Martha Stewart. (2017, Feb 28). Retrieved from https://studymoose.com/insider-trading-and-martha-stewart-essay

Insider Trading and Martha Stewart essay
Live chat  with support 24/7

👋 Hi! I’m your smart assistant Amy!

Don’t know where to start? Type your requirements and I’ll connect you to an academic expert within 3 minutes.

get help with your assignment