Insider Trading, Stock Market And Other Instruments

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.

The SEC assists in providing investors with reliable information upon which to make investment decision. The Securities Act of 1933 requires most companies planning to issue new securities to the public to submit a registration statement to the SEC for approval. The Securities Exchange Act of 1934 provides additional protection by requiring public companies and others to file detailed annual reports with the commission. Smackey Dog Food, need to file next forms:

In this paper the main focus will be on the clause of 'Liability to contemporaneous traders for insider trading' which is section 20A in the Securities Exchange Act of 1934. The paper will start off by giving some basic points that make up this section followed by the history and background of the Securities Exchange Act of 1934. The paper will then highlight the major impact that this act has made on the industry in the current global standing. Some of the basic points that make up the subsection 20A clauses include the following:

“There must be a strict supervision of all banking and credits and investments; there must be an end to people’s speculation with other money (pg 92).” The SEC was designed to keep security on Wall Street.

A trend that has recently emerged as a violation of section 10(b) is the use of the internet to engage in pumping and dumping. Although not a new concept, the internet has been used to increase the effect because of its ability to disperse particular company information very quickly in order to affect stock prices. Persons initiating this deceptive behavior can sell their stocks for profit once they see that the changes to price have occurred. This type of behavior is considered fraud since it is a manipulation of

This is called insider trading and is one of the acts that the SEC is responsible for stopping. One of the most famous cases occurred in late 2001 in which one of America’s most famous woman was arrested. This person was Martha Stewart someone who everyone in America has seen on T.V. countless times. Stewart who owned four thousand shares of ImClone stock was imprisoned for five months after being found guilty of insider trading by the SEC. The C.E.O of the company ImClone, Sam Waksal was found to be the main culprit in the case. Waksal discovered that his company would be taking a huge hit in the stock market. The C.E.O urged his broker to sell the stock because if he were too keep it would have lost hundreds of thousands of dollars. When asking his broker to dump the stock a natural instinct took over and the broker knew that something was going to happen to the company forcing its stock to drop. Waksal and Stewart however shared the same broker, when the news was conveyed to the broker Martha was urged to sell her stocks. After she did the SEC charged her with insider trading for selling her stock with illegal information. Even though Martha did not directly receive the information she still used critical information that was only available to a select few in her favor. This forced the SEC to carry out its purpose and maintain fair, orderly, and efficient

The stock market is the market where shares of publicly owned companies are issued through exchanges or over-the-counter markets. Some individuals, such as R. Foster Winans, will attempt to cheat the stock market and make profits illegally through insider trading. Insider trading is an illegal activity where people will trade stocks based on confidential information. R. Foster Winans was charged with insider trading because of his knowledge of what would appear in the Wall Street Journal’s, “Heard on the Street Column.” R. Foster Winans got the punishment he deserved for insider trading on the stock market.

Rule 10B-5 was created under the Securities Exchange Act of 1934. It is a regulation known as the Employment of Manipulative and Deceptive Practices that states that it is not legal to make any false statement of material fact with scienter or leave out any material facts that would cause the statement to be misleading in concert with the purchase or sale of any

Insider dealing has been affecting the efficiency of stock markets in different places like United States, United Kingdom and Australia. Hong Kong is of no exception. Basically, insider dealing refers to the trading of a corporation’s stock or other securities by individual with potential access to non-public information of the company. The law of insider dealing in Hong Kong provides a much more detailed definition and is very comprehensive. However, when it comes to enforcement, it seems not very effective. In the following, the law of insider dealing in Hong Kong will be summarized. After analyzing the comprehensiveness of the law, the underlying reasons of the difficulty in enforcement will be identified. Some

These acts were a violation of the Securities Act of 1933. The objectives of the Securities Act of 1933 are that investors obtain accurate reports of a company's commerce and to prevent misleading securities sales (USSEC, 2007). Although, the USSEC cannot guarantee the information provided by each company; the Securities Act of 1934 grants authority to the USSEC with disciplinary authorization (USSEC, 2007).

The Act was criticized for being made appropriate to all foreign issuers listed on a U.S. exchange, even though several of the behavior the Act targeted was either a non-issue in foreign countries or was already efficiently regulated. According to Fraser, I. (Oct., 2002) this broad extraterritorial scope is particularly problematic given that the SEC has encouraged foreign issuers to enter U.S. capital markets by providing several accommodations to foreign practices and polices not inconsistent with the protection of U.S. investors. Foreign companies dispute that, as of the end of 2001, more than 1,300 foreign issuers had entered U.S. capital markets and became reporting companies in reliance on the SEC's accommodations.

The primary constraint on firms' ability to permit their insiders to trade on the basis of the nonpublic information they obtain in the course of the employment is rule 10b-5, which is the SEC's principal weapon against insider trading. The SEC's authority to enact rule 10b-5 is based on 10(b) of the 1934 act, a broad provision that authorizes the SEC to prohibit "any manipulative or deceptive device or

The mission of FASB is to “improve reporting, focus on traits that are important and reliable and on quality of comparison and consistency, to keep up to date with current trends to reflect modifications in methods used and economic changes, and to improve the common understanding of the purpose and content within financial report” (FASB, 2008). The FASB has an obligation to uphold ethical standards as well as to ensure rules and regulations are followed in the way of financial reporting. The FASB uses input from other agencies when developing or amending standards such as the SEC. Before the Great Crash of 1929, little was done to regulate the securities market (SEC, 2008). Two laws were created to help improve investor confidence: “Securities Act of 1933 and Securities Exchange Act of 1934” (SEC, 2008). According to SEC (2008) the purpose of these laws is to make sure companies display accurate data about their financial accounts, the securities that are sold and involved risks and for the brokers who sell and trade to treat investors with respect by being fair and honest. A more recent law signed in by President Bush in 2002, was the “Sarbanes-Oxley Act of 2002” (SEC, 2008). This act created changes in improving responsibility, disclosures and

Insider trading refers to the trading of a listed company’s stock or other financial securities by individuals who has access to non-public material information about the company. This action often occurs within employees/ex-employees of the listen company. Information is considered to be non-public material information if making it public would affect the price of securities, and using such information in decisions to buy or sell financial securities would be unfair to non-insiders (Bainbridge, 2013). Insider trading is treated as a mischief in more than 90 countries, and defendants are imposed with penalties (Beny, 2012). Specific insider conduct regulations in New Zealand were first enacted in 1988, followed by amendments in 2002, 2006 and 2008. The insider conduct regimes between 1988 and 2008 are often considered as a failure due to weak enforcements. Thus in 2008, the regulator introduced a new regime, which was a close model to the Australian insider conduct legislation. Both regimes are expansive, meaning it could be applied to any person in possession of insider information. However, while the Australian laws were aggressively enforced (more than 26 prosecutions were brought since then), no prosecutions have been launched under the new legislation in New Zealand. In addition, New Zealand also had no convictions secured prior to 2008, illustrating a clear enforcement deficit in the New Zealand

Securities regulations began when Congress enacted the Securities Act of 1933 in reaction to the 1929 Stock Market Crash—the infamous start of the Great Depression. The legislature created the 1933 Act to safeguard the economy from experiencing another event like the Great Depression. The objective of the Securities Act of 1933 was to “require that investors receive financial and other significant information concerning securities being offered for public sale; and prohibit deceit, misrepresentations, and other fraud in the sale of securities.” In other words, the Securities Act of 1933 required issuers to fully disclose all material information that a reasonable shareholder would require in order to make up his or her mind about a potential investment. The Act focuses on governing offerings by issuers and creating transparency between issuers and investors so that investors receive more protection than prior to the Act.