Passage A Insider-trading law makes it a crime to make stock transactions, or help others make stock transactions, based on information you have ahead of the special position within a company.
However, trading based on information you have that everyone else doesn’t—isn’t this part of the very definition of a functioning stock market? The entire field of stock brokering is based on people gaining knowledge that others don’t have and then using it to profit themselves or their clients. If you analyze a have. That doesn’t make you a criminal; it means you’ve done your homework.
Stock markets work best when all the relevant information about a company is spread as widely as possible, as quickly as possible. Stock prices represent a constantly shifting amalgamation of everyone’s information about and evaluations of a company’s value. It helps when those who to act so that stock prices reflect them.
Someone selling a stock because they know something will happen soon that will lower the stock’s value helps spread the knowledge that the price ought to be dropping. Such actions help ensure that stock prices do reflect a more That’s good for everyone in the stock market.
When contemplating insider-trading law, it helps to consider a far more widespread practice: “insider nontrading”—stock sales or purchases that would have been made, but aren’t because of inside knowledge. This is certainly happening every day, think to lock someone up for it.
Passage B One of the basic principles of the stock market is transparency. In a transparent market, information that influences trading decisions is available to all participants at the same time. Success in the market can then be gained only by skill in analyzing the information and making good investing decisions. In a good investment, and success is based on individual merit and skill.
In insider-trading situations, some people make investment decisions based on information that other people don’t have. People who don’t have access to the inside information can’t make similarly informed investment decisions. That unfairly compromises the market: people with inside information can make informed trade decisions far before other people to earn money in the stock market.
This, in turn, causes a loss of investor confidence and could ultimately destroy the market. People invest in the stock market because they believe they can make money. The whole point of capital investments is to make good investing decisions and make money over time. If investors believe they can’t make money, grow and be successful, and it could ultimately lead to widespread financial repercussions.
What this question is testing
Your task
Identify why the author included the referenced detail at that point in the passage — its function, not its content.
Common trap
Answers that merely repeat or summarize the topic of the detail instead of describing the role it plays.
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Ask what job the detail does for the paragraph, then for the passage's broader point.
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