Martha Stewart Scandal

Topics: U.S. Securities and Exchange Commission, Martha Stewart, Trade Pages: 1 (405 words) Published: December 8, 2012
Martha Stewert is the owner of Omnimedia which handles her show, clothing line etc. What she did was owned a large sum of stock in a biotechnology firm (ImClone) and was chums with them. She was tipped off that one of the things they researched did not pan out. The spending on the project would not yeild any sales so the expected companies profits would never be. This is a bad thing if you own the stock the way Martha Stewart did. The illegal part was that she was told that the company was not doing well before anyone else or before it became public knowledge. She sold her stock and the next day or two the company announced their problems. This caused their stock to plunge in trading but Martha sold hers right before that happened.The legal term for what she did is "insider trading" which is illegal, unethical and can land you jail time. The Securities and Exchange Commision which watches for large sales of stock right before bad news hits caught it and went after the CEO of ImClone and her. She said nobody tipped her off which is a lie so she dug herself a hole.

What Is Insider Trading?
When most people hear the term “insider trading” they think of the illegal version. However, the term “insider trading” can also mean the perfectly legal buying and selling of stock by a company’s corporate insiders. Insider trading is legal when these corporate insiders trade stock of their own company and report these trades to the U.S. Securities and Exchange Commission (SEC). That way the insider trading is not kept a secret and anyone can find out a corporate insider’s opinion of his or her company. Insider trading is only illegal when a person bases their trade of stocks in a public company on information that the public does not know. It is illegal to trade your own stock in a company based on this information but it is also illegal to give someone that information, a tip, so they can trade their stock.
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