Insider trading, as you learned, is illegal. Not everyone agrees that it should be, though. A small group of legal scholars believes that insider trading should be completely legal. They argue that if insider trading was more widespread, it would cause stock prices to adjust almost instantly to new information. They further argue that insiders, if able to make profits from insider trading, would therefore accept lower salaries and benefits.
1. Why is insider trading illegal in the first place? Who is supposed to be protected and why?
2. What is wrong with the argument advanced by the legal scholars who want insider trading made legal? Or are they right? Explain your answer.