Insiders are people who have confidential information about upcoming events that will affect the price of a stock. It is common for the price of a stock to go up when investors learn that the company is negotiating a merger or acquisition of another company. Insiders are not supposed to buy or sell any stock they have confidential information about or to tell anyone this information to avoid illegal profit from stock dealing. This process, known as “tipping,” is illegal. However, many government public officials have access to insider information and legally get rich from tipping.

1. If you were “tipped” by an insider, would you buy/sell the stock?

2. What are the implications of using insider information? Is anyone hurt by the practice? If yes, who is hurt, and how are they hurt?

3. Without using insider information, some speculators try to predict which companies are likely to merge or be acquired and buy stock options. This is a legal way of making money, but is it ethical?

4. Is it ethical for government officials to use insider information to make money?