Insider Trading: SEC v. Mark D. Begelman Essay

Decent Essays

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 …show more content…

Analysis: The facts of the case are circumstantial yet lay out a pattern of wrongdoing by the defendant. Specifically that Begelman willfully used non-public information to his financial advantage. The following timeline is indeed suspicious but no “smoking gun” or direct evidence of wrongdoing. 1. Begelman attends a conference with the WPO. 2. The WPO includes members privy to non-public information surrounding the merger. 3. Begelman maintains a close relationship with said members. 4. Days before the merger is made public, Begelman initiates a trade for 25K shares of Bluegreen stock 5. Begelman holds the stock for 15 days. 6. Begelman sells his position in Bluegreen the day the merger is announced for a $14K realized gain. How strong is the case? It is not definitive given the information available but in reality the truth does not matter. Mounting a defense against the SEC makes little sense for Begelman. Being a civil case, criminal charges are not a consideration. The state is seeking a civil penalty and a repayment of the gains (Securities and Exchange Commission). If Begelman surrenders his profits and pays a penalty of $15K he is able to avoid any admission of wrongdoing (Gehrke-White). Thus, it is pragmatic and financially beneficial (avoid prolonged legal fees) for Begelman to settle and move on regardless of his actual guilt or innocence. The only winner in the case is the State. The SEC effectively extorts $30K from the defendant by

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