Insider Trading By The Black 's Law Dictionary

When assessing the economic damage to due to Paul Thayer and those that he tipped off about the acquisition of Campbell Taggart, it should be noted that some argue that this kind of insider trading circulates information and forces the stock to its “true value.” If we assume this argument to be flawed, then part of Anheuser-Busch stock dip after the announcement was due to the insider trading and the fact Anheuser-Busch probably paid more to acquire its target. Thayer and his friends trade the Campbell stock for nearly a month before any public announcement of the merger. On July 27 nearly half the volume was insider volume controlled by those individuals who were in violation of rule 14(e)-3 (See exhibit 2). The increased volume might

The Security and Exchange Commission is the organization who monitors fraudulent transactions and insider trading. Some experts in ethical behavior consider inside trading the most dramatic form of utilitarian ethics.

Insiders have immediate access to huge amounts of valuable company information and can misuse their privileges or imitate someone else with higher privileges to plant a virus, copy information, or to infect research data. The main idea for insiders to sell out to a competition are: lack of loyalty, disgruntled, boredom, mischievousness, blackmail, and very important, money.

Overview of the Case: The Securities and Exchange Commission claims Mark D. Begelman misused proprietary information regarding the merger of Bluegreen Corporation with BFC Financial Corporation. Mr. Begelman allegedly learned of the acquisition through a network of professional connections known as the World Presidents’ Organization (Maglich). Members of this organization freely share non-public business information with other members in confidence; however, Mr. Begelman allegedly did not abide by the organization’s mandate of secrecy and leveraged private information into a lucrative security transaction. As stated in the summary of the case by the SEC, “Mark D. Begelman, a member of the World Presidents’ Organization (“WPO”), abused

1. Why didn’t the SEC accuse Mark Cuban of traditional illegal insider trading, considering he was the largest, individual shareholder of Mamma.com?

The first grey area was Goldman Sachs using a technique called “layering”. Goldman would start a company and used their own money to buy 90% of the shares. The public would see how the stocks were selling so quickly and wanted a piece of the pie. The public were unaware that Goldman was buying their own stocks and then continuously increasing the price of the stock and selling it back at the higher price. Goldman saw how well this was working and decided to continue with this practice. He started new companies and followed the same formula as before, making bags of money, while investors had no idea

Corporate insiders must act in good faith and in a manner that they reasonably believe will be in the best interest of the corporation including safeguarding corporate information. Also they have a duty to care for the corporation as they would their own. So in this case, the insider who has to be loyal to his company and may not be able to go to the authorities with information that can damage the company’s reputation also has to care for this same company and in caring means if there is anything unethical going on should be able to whistle blow it, however this creates conflict for the insider. It’s like they are stuck in between, however way you look at, whether they report it or not, they are damned as the book stated because once authorities know, the company might suffer public humiliation and if they don’t report it, the company eventually will collapse due to everything blowing up just like Enron.

Through the history of the United States and the history of corporate fraud, many infamous people and entities have taken advantage and abused the corporate system while finding loop holes or discrepancies to use in their favor. Corporate Fraud consists of activities undertaken by an individual or company that are done in a dishonest or in an illegal manner, and are designed to give an advantage to the perpetuating individual or company (Ivestopedia,1). Investors have been known to throw money around if its meaningless as seen on Wolf of Wall Street and other movies. In such large public firms, its rather difficult to keep track of every dollar, so cutting corners here and there in everyday transactions, is something that becomes a

Insider trading – insider trading is the trading of a corporation’s stock or other securities by individuals with potential access to non-public information about the

Firstly there is a significant Ethical and morale lapse in a share floated company when the CEO engages in related party transactions. The moral issues arise

The law defines different terms very broadly which is very effective in prosecution. Take the definition of “connected person” as an example, according to the law, a corporation may connect to another corporation, a director or employee or a substantial shareholder may connect to a corporation. If the insider has a fiduciary duty to the company, such as that held by a director, the company may claim any profits he makes from abuse of his position. The duty is held to the company, rather than to individual members and so a member who sold his shares to directors who had information affecting the future value of those shares was unsuccessful in a claim against those directors. But you can try to bring legal action against the company instead of the director.

Hiding or divulging information: Goldman bet against their clients several times. They knew material information on certain investment; however, they never communicated that to their clients because they were making money off them.

For example, Manna (1966) states that insider trading should be allowed because insider trading is the most effective way to compensate to insider to generate new economic information in firm. Hirshleifer() states that for insider, good information is as good as bad information to make profit but this profit may not be related to economic contribution of insiders in corporate. Proponents of insider trading suggest (Carlton and Fischel (1983) that insiders are the most informative member in the market, and by trading, they bring new information to the markets and causing prices to change toward their true value and, therefore, promoting the optimal allocation of resources. On the other hand, Scholars (Benabou and Laroqu, 1992) say that insider trading may provide incentive to corporate insiders either to delay the announcement of price-sensitive information to public or to prevent to release price sensitive information, which in turn makes stock prices less informative. However, Georgakopoulos (1993) argues that restriction on insider trading may have little adverse impact on market efficiency but it reduces the cost of transaction that burdens on uninformed traders

The laws restricting insider trading define "inside information" as information that is both "material" and "nonpublic." Material information includes any information that is public.

FI’s with large shareholdings are better apt at influencing the performance of investee firms in their portfolios by being a quasi insider and creating knowledge advantage using private information gained through regular meetings (Holland, 1999). Through cooperative means FI’s are able to probe, monitor and direct the corporate strategies, management and financial performance without direct intervention. Private and informal influencing is favored to public interventions as it may affect reputation of all parties involved.