UPDATED: April 2022
4 Myths About Insider Trading – Insider trading is constantly under the scanner whenever there are major trades taking place in the stock market. For the most part, the Securities and Exchange Commission (SEC) is the organization that looks at all lawful and unlawful trades. There is a lot of misinformation around insider trading, its impact on the stock market, and what constitutes insider trading.
Table of Contents
- 1 4 Myths About Insider Trading
- 1.1 1. Insider trading is bad for the stock traders who are buying or selling to the insider
- 1.2 2. If insider trading was legalized, it would reduce capital investment, trading, and liquidity as the stock market would lose its integrity
- 1.3 3. It is feasible to enforce sensible insider trading laws
- 1.4 4. Illicit trading is uncovered with the high-detection methods of the SEC
4 Myths About Insider Trading
To counter all that misinformation, we will be looking at some of the myths surrounding insider trading so that you get the complete picture. It’s better to be informed about insider trading so that you don’t second guess yourself or think that you’re going to get into trouble whenever you’re trading. So, here are the most common 4 myths about insider trading:
1. Insider trading is bad for the stock traders who are buying or selling to the insider
The statement that insider trading is bad in all cases is false because the stock traders aren’t going to be affected by insiders trading in the stock market. That’s because they are already trading in the market and would lose or make around the same amount, irrespective of the other party’s identity. So, insider trading isn’t going to be bad for the stock traders who will be buying or selling to insiders in the stock market.
2. If insider trading was legalized, it would reduce capital investment, trading, and liquidity as the stock market would lose its integrity
This statement is again untrue, and there are a lot of studies that contradict this strongly. The stock market isn’t going to be compromised, and stock traders will not lose confidence in the market. You can look at the period before the 1960s to gauge how strong the stock market of the United States was before there had been any serious enforcement. There is nothing to support this statement, and it means that legalizing insider trading isn’t going to have as drastic an effect on the stock market as predicted.
3. It is feasible to enforce sensible insider trading laws
Another misconception surrounding insider trading is that the SEC can help introduce sensible laws that govern insider trading. However, due to SEC’s campaigns against insider trading, it can easily be determined that enforcement will be difficult and next to impossible. Apart from that, the fact that you can’t get inside the mind of an insider and learn when they plan to buy and sell in the market ensures that policing insider trading will be impossible from all angles.
4. Illicit trading is uncovered with the high-detection methods of the SEC
This is another false myth, one that the SEC has been making for a very long time. It’s still as untrue as it was over 50 years ago. The SEC’s methods for most of its policing are wiretapping and using informants to capture people involved in illicit trading activities in the stock market.
About the Author & How YOU Can Profit: This article is the copyrighted product of the team at BuybackAnalytics.com .
Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept: Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:
LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)
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