In many cases, insider trading is difficult to detect, often hidden behind layers of influence and authority. It typically involves individuals who sit in positions where they have early knowledge about business deals, financial results, or market strategies. They use this information to make financial gains for themselves or others close to them, while ordinary investors remain unaware of such developments.

This unfair practice goes against the principle of fairness in the market. Shareholders who buy or sell shares without access to the same information are left at a disadvantage. When they discover that executives have used private information for personal gain, their confidence in the company and its leadership is often badly shaken. Trust, once lost, is hard to rebuild.

In many countries, including Nigeria, efforts are being made to improve transparency in business operations, but insider trading continues to pose a threat. Although laws exist to check such behaviour, enforcement remains weak in some quarters. The involvement of top executives makes matters worse because it sends a message that those who are supposed to set the example are themselves involved in dishonest acts.

One major problem with insider trading is that it shows that some directors are more interested in personal gain than in the long-term success of the organisation. Such behaviour creates a culture where integrity takes a back seat. It can encourage other employees to seek shortcuts or engage in unethical acts, especially if they believe that misconduct will go unpunished. Over time, this weakens the internal controls that help protect the company and its assets.

Stakeholders expect transparency and accountability. When reports of insider trading become public, it affects the company’s image. Investors may choose to withdraw their funds. Regulators may impose penalties. Staff morale may fall. Customers may turn to other businesses. All of these reactions affect performance and long-term growth.

There is also the legal aspect. Many countries treat insider trading as a criminal offence. Directors found guilty of this offence risk fines, prison terms, or disqualification from serving on boards. Such outcomes affect not only the individuals involved but also the companies they represent. In some cases, entire boards come under public scrutiny, especially when it appears that no effort was made to prevent or report the offence.

The problem is not limited to large companies. Even smaller firms can suffer when there is suspicion of unfair dealings by those at the top. The effects may be more damaging in smaller companies where the line between ownership and management is often blurred, and where a single individual may have wide influence over decisions.

To reduce this threat, companies must strengthen their internal rules. Clear policies should guide directors and executives on what information is considered confidential and how it must be handled. There should be proper disclosure procedures, and transactions made by insiders should be regularly monitored.

Boards must also take their oversight duties seriously. The audit and risk committees, in particular, should be active in reviewing trading activities and whistleblowing reports. Encouraging staff and even external parties to report suspicious behaviour without fear is essential.

Training can also help. Some directors and top-level staff may not fully understand what counts as insider trading. Some may wrongly believe that acting on "tips" from trusted sources is not illegal. Regular training and guidance will reduce such assumptions and promote better conduct.

Technology can play a helpful part in monitoring share transactions and detecting irregular patterns. Companies can invest in systems that alert compliance officers when large trades are made shortly before or after major announcements. Such tools can serve as an early warning system.

More importantly, leaders must lead by example. If the board and management show that they take ethics seriously, it will send the right message to everyone in the organisation. When misconduct is discovered, swift action should be taken. Punishment must be clear and fair, regardless of the rank of the offender.

Regulators also need to do more. While some countries have made progress in dealing with insider trading, others still struggle. Improved cooperation between agencies, better data sharing, and public education can raise awareness and deter would-be offenders.

No doubt, insider trading is not just a legal offence, it is a breach of trust. Stakeholders want to believe that those in charge of businesses are honest, fair, and committed to creating value for all. When this trust is broken, the damage can spread far beyond a single trade or transaction.

Directors and senior executives hold positions of great responsibility. Your actions must always reflect the duty you owe to the company and its people. Choosing short-term gain through underhanded actions harms your reputation and also the future of the business you lead.

To rebuild confidence, companies must keep ethics and fairness at the centre of their governance practices. They must remind everyone, from the boardroom to the shop floor, that personal success must not come at the cost of public trust.

If Nigeria and other developing markets hope to attract serious investment and promote business growth, they must take insider trading seriously. It is not enough to have rules on paper. These rules must be enforced, and those in charge must be held to account.

Only then can stakeholders trust that the boardroom is a place of honour, not a doorway to shady backroom deals.

Research & Advocacy Department,