Martha Stewart apparently got an insider tip from her broker on a stock, involvi

Question

Martha Stewart apparently got an insider tip from her broker on a stock, involving a company with whom she was personal friends of the president. She apparently lied about what transpired before a Securities and Exchange Commission investigation. She, her broker, and the president of the other company all wound up spending time in jail. 1. Is it ethical for a broker to dispense any insider information? To dispense it to favored clients, but not to his company? To disclose it to favored clients but not other clients? 2. To what extent is it practical to require that the president/majority shareholder of a company and knows the company is not doing well will not sell his stock before this news becomes public?

Explanation / Answer

1. No, it is not ethical for a broker to dispense any insider information because it is completely confidential to the company but if we look at the role of a broker we will see that is what they actually do by sharing information about a particular a stock and attract or make people interested about the same. Sharing this information to favored clients is also not unethical as per my thinking and perspective but yes if the broker is not sharing the information with their own company then it is unethical to do so. each and every business possess favored clients and these are the clients which has given huge business to the organization or there is some other reasons behind it and if the organization or broker has a favoring nature towards these clients then I don't feel that it is unethical from any perspective.

2. Selling a stock before it is being public for a shareholder or a president is not only unethical but also illegal and this act is known as insider trading when an individual is aware of any information that is confidential to the organization sell the stocks based on this information before the news become public. The act may seem practical but is unethical and illegal in law.

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