If insiders were allowed to proﬁt on their inside information without penalty, ﬁnancial markets would
be less eﬃcient.

Question

Quizplus · Accepted Answer

Allowing insiders to profit on their inside information without penalty would lead to unfair advantages and result in distorted prices, which would make financial markets less efficient. It would also erode investor confidence and reduce market participation, leading to further inefficiencies. Prohibiting insider trading ensures transparency and fairness in the markets, promoting efficient price discovery and investor trust.

If Insiders Were Allowed to Proﬁt on Their Inside Information