Insider trading occurs when a company insider such as an executive

Question

Insider trading occurs when a company insider such as an executive or director trades in the company’s stock based on material information that has not yet been made public. Insider trading has been illegal in Country Z for several decades. The number of individuals charged with insider trading in Country Z in the last five years has tripled compared to the number of people charged in the previous five years. These statistics do not, however, show that insider trading has become more common in Country Z; rather, these statistics demonstrate the increased effectiveness on the part of the regulators responsible for enforcing these laws.

Which of the following, if true, most strengthens the argument?

A . The number of people charged with other financial crimes, such as fraud, has also increased over the past five years.

B . Fines and jail time for insider trading were both increased in Country X six years ago.
 
 C . New software allows a single investigator to review more potentially suspicious trades by company executives per day.
 
 D . Every four years a new person is appointed to run the agency responsible for enforcing insider trading laws in Country Z.
 
 E . The average daily volume of stock trades in Country Z has doubled in the past five years.

surendrasaini1 · Answer

Insider trading occurs when a company insider such as an executive or director trades in the company’s stock based on material information that has not yet been made public. Insider trading has been illegal in Country Z for several decades. The number of individuals charged with insider trading in Country Z in the last five years has tripled compared to the number of people charged in the previous five years. These statistics do not, however, show that insider trading has become more common in Country Z; rather, these statistics demonstrate the increased effectiveness on the part of the regulators responsible for enforcing these laws.

Which of the following, if true, most strengthens the argument?

A . The number of people charged with other financial crimes, such as fraud, has also increased over the past five years.( Insider trading is the main focus)

B . Fines and jail time for insider trading were both increased in Country X six years ago.(country X is not in question)
 
 C . New software allows a single investigator to review more potentially suspicious trades by company executives per day.( Strengthen,keep)
 
 D . Every four years a new person is appointed to run the agency responsible for enforcing insider trading laws in Country Z.(appointment of new person every year is not going to affect the enforcement)
 
 E . The average daily volume of stock trades in Country Z has doubled in the past five years.(what if enforcement is not done)

Will go with choice C

Thanks

mira93 · Answer

Here is OE from MGMAT

(1) Identify the Question

The words strengthen and if true in the question indicate that this is a Strengthen the Argument question.

(2) Deconstruct the Argument

More people in Country Z are being charged with insider trading. This increase is not due to increased insider trading but rather due to increased effectiveness on the part of the regulators—in other words, they are better at catching people now than they were before.

Here is one possible way to map the argument.

++ People charged with IT

Not due to more IT

(3) State the Goal

On a Strengthen question, the goal is to find an answer that makes the argument more likely to be valid. In this case, the answer should support the idea that the increase in people charged with insider trading is due to the fact that regulators are becoming more effective at finding people who break the law.

(4) Work From Wrong to Right

(A) No information is provided about whether the regulators responsible for enforcing insider trading regulations are also responsible for enforcing the regulations related to other financial crimes. Therefore, the number of people charged with other financial crimes is not relevant.

(B) The argument relies on statistics about the number of people charged with insider trading, not the penalties that these people receive. This answer may support the idea that Country Z is concerned with insider trading but it does not address whether the increased number of people charged is due to an increase in insider trading or an increase in the effectiveness of those charged with enforcing the laws.

(C) CORRECT. This answer provides support for the idea that regulators have become more effective. If investigators are able to review more trades, they are likely to catch more insider trading, even if the amount of insider trading did not change.

(D) No information is provided about the skill or effectiveness of the new head of the agency compared to the previous head; without more information this answer does not affect the conclusion.

(E) It is not clear how the total number of trades affects the amount of insider trading. If anything, this answer could provide an alternative explanation for the increase in charges related to insider trades. If it is assumed that insider trading is proportional to total trading, then there could be more insider trading because total trading increased.

Ved22 · Answer

why cant be E right. Because the number of stocks has increased, and more havebeen caught so may be due to the strict and effective of regaulators. rather opetion c that talks about a software doing it . Pls clarify

yazadsarkari · Answer

Insider trading occurs when a company insider such as an executive or director trades in the company’s stock based on material information that has not yet been made public. Insider trading has been illegal in Country Z for several decades. The number of individuals charged with insider trading in Country Z in the last five years has tripled compared to the number of people charged in the previous five years. These statistics do not, however, show that insider trading has become more common in Country Z; rather, these statistics demonstrate the increased effectiveness on the part of the regulators responsible for enforcing these laws.

Which of the following, if true, most strengthens the argument?

A. The number of people charged with other financial crimes, such as fraud, has also increased over the past five years.( Insider trading is the main focus)

B. Fines and jail time for insider trading were both increased in Country X six years ago.(country X is not in question)

C. New software allows a single investigator to review more potentially suspicious trades by company executives per day.( Strengthen,keep)

D. Every four years a new person is appointed to run the agency responsible for enforcing insider trading laws in Country Z.(appointment of new person every year is not going to affect the enforcement)

E. The average daily volume of stock trades in Country Z has doubled in the past five years.(what if enforcement is not done)

Will go with choice C

Thanks

Ro_007 · Answer

The assumption I am making in Option A is that the regulator of financial crimes is the same as regulator for insider trading. Anyone who knows even a little bit about financial markets will agree that this is a fair assumption.

The assumption i am making in Option C is on the term "new". New could mean past 5 days / months / years. How do I know when this software was installed due to which charges have increased in the last 5 years indicating effectiveness of the regulator in enforcing the regulations.

In Option A, I get new info that if # crimes charged have increased - doesnt this indicate that their overall effectiveness has increased ?

agrasan · Answer

Hi  MartyMurray   KarishmaB

I am stuck between (A) and (C).

I selected (A) because it is logical that other financial crimes are also handled by regulators so (A) seems to strengthen the conclusion. 
On the other hand, (C) talks about an investigator, how can we say that this is referring to regulator only and we don't know from the argument whether regulators use this type of new software. Even if we assume that this was the case, how can we eliminate (A)?

KarishmaB · Answer

This is what you have to strengthen: 
 These statistics do not, however, show that insider trading has become more common in Country Z; rather, these statistics demonstrate the increased effectiveness on the part of the regulators responsible for enforcing these laws.

That insider trading has NOT become more common - the regulators who enforce these laws (insider trading laws) have become more effective. That the cause is not X, it is Y.

A . The number of people charged with other financial crimes, such as fraud, has also increased over the past five years.

This option does not support "It is not X, it is Y".
If people implicated in other crimes are also rising, it could be because all financial crime rates are going up. It could also be because all regulators are becoming more effective. Hence it doesn't add much value. 
 Also, we cannot assume that same regulators are responsible for all financial crimes. Our argument focuses only on regulators  who enforce  these  laws (insider trading laws).

On the other hand, option (C) tells us that a new software allows a single investigator (anyone investigating) to review more potentially suspicious trades by company executives per day. So the regulators are able to review more potentially suspicious trades by company executives per day and hence are getting more efficient. 
So (C) supports.

agrasan · Answer

Thanks  KarishmaB 
If I understand you correctly, (A) says reason can be X or Y so its impact is not very clear whereas (C) strictly talks about Y, right?

MartyMurray · Answer

Yes, what you said is basically correct.

All (A) tells us is that the number of people charged has increased, and it doesn't say why. So, given what (A) says, the reason could be that crime has become more common or that regulators have become more effective.

(C), on the other hand, provides at least some reason to believe that regulators have indeed become more effective.

Insider trading occurs when a company insider such as an executive

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Insider trading occurs when a company insider such as an executive

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