The insider trading case against Scott London focused on Multiple Choice providing confidential information about audit clients to a friend. personally selling stock of audit clients after receiving confidential information. providing confidential information about audit clients to his son. personally buying stock of audit clients after receiving confidential information.
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Scott Greensburg, CEO of Media Corporation, owns and operates radio stations. Media Corporation became interested in acquiring EZ Comm, Inc., which also owned radio stations. To initiate negotiations for an acquisition, Greensburg met with EZ's CEO, Alan Bauxter, on July 12. Two days later, Scott phoned his brother Matthew, who, the next day, bought 3,000 shares of EZ stock. Matthew discussed the deal with their father Jim, who bought 20,000 EZ shares four days later. On July 25, the day before the EZ bid was due, Scott phoned his parents' home, and Matthew bought another 3,000 EZ shares. The same routine was followed over the next few days, with Scott periodically phoning Matthew or Jim, both of whom continued to buy EZ shares. Media Corporation's bid was refused by EZ, but on August 5, EZ announced its merger with another company. The price of EZ stock rose 30 percent, increasing the value of Matthew and Jim's shares by $400,000 and $600,000, respectively. Assume the Securities and Exchange Commission (SEC) filed a civil suit in a federal district court against Scott. Instructions: Consider the above fact situation and then discuss what law(s) the SEC is likely to claim were violated. Should the court hold Scott liable, why or why not? What sanction, if any, should be imposed?
Manasvee S.
Carl, a credit officer for U Bank, evaluates and approves extensions of credit to bank clients. He has access to nonpublic information about clients' earnings, performance, acquisitions, and business plans. U Bank caters to a very wealthy clientele, and Carl frequently travels to meet potential clients for lunch dates at fancy restaurants. Carl contracts privately with Rubin, an independent accountant, to sell securities based on bank client information. Rubin believes Carl is very smart and has a "nose for business." Rubin trades securities of more than 10 different companies, and both men profited more than $5 million over five years. On the way to a business meeting with a potential new bank client, Carl stops at Rubin's house to discuss business dealings and have a few drinks. Carl leaves Rubin's house drunk and is killed when his car strikes a tree. Carl's family sues U Bank for Carl's death. Rubin, discovering the investment scheme perpetrated by Carl, sues U Bank when he is arrested for violation of the Securities Exchange Act of 1934. Under what agency law doctrine might the bank be liable for Carl's death, and what is the key factor for making this determination? Is U Bank liable to Rubin, and is he guilty of violating the Securities Exchange Act of 1934? Explain.
Akash M.
What limits should there be on insider trading? In the USA, Pete Rose was a popular baseball player and then manager who was punished for betting on his own team to win. Should Pete Rose be allowed to profit from betting on the success of a team he managed? Should Pete Rose be punished more harshly if he profited from betting on the failure of a team he managed? In the Enron case, several managers sold all their Enron stock about an hour before it became public knowledge that the company was not worth as much as everyone thought. Should a manager be punished for acting prudently based on knowledge they have discovered honestly only because the general public does not have that knowledge? Should managers be required to disclose private information they have that might influence the investment decisions of the public? Also, address the question of timing about the dissemination of information: is it enough to share information on a public website, or should a formal press conference be required?
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