Dracca's Senior Vice President Of Sales

Did Marley and Farian commit any securities violations?

Dracca’s Senior Vice President of Sales Mr. Marley and his sales representative Bill Farian committed insider trading, which under the Securities and Exchange Act of 1934 is listed as a security fraud (U.S. Securities and Exchange Commission, n.d.). Insider trading involves trading of a public company’s stock or related securities by individuals with access to non- public information about the company (U.S. Securities and Exchange Commission, n.d.). There are two types of insider trading: the first involves the trading of a company’s stock or associated security by corporate insiders for example directors, key employees or holders with at least a tenth of the company’s stocks (Harris,

As such VGV’s action of selling the molding machine and filing bankruptcy does not breach the Bankruptcy Act. Although legally strategic, it was still an unethical decision (Renshaw, Kubat & Angellatto, n.d.). When a company files for bankruptcy as noted in chapter 7 of the bankruptcy Act, it means that the company is badly in debt unable to pay its creditors and as a result the appointed trustee is generally tasked to sell the business assets and distribute the proceeds to its creditors(United States Courts, n.d.). If VGV operated ethically, they would have reserved the molding machine to sale by the trustee so as to try as much as possible to pay off its debt to Dracca. Instead the company chose to sell the machine at significantly lower price to another company and pocket the money. Obviously, it now means that Dracca may never be able to get the money VGV’s owes them. VGV’s has already resold the machine and in addition filed for bankruptcy which as laid out in chapter 7 can help a the business relieve liability for some of its business and personal debt tied to it although not entirely (Madden, 2009). Considering the two businesses had good business relationship that is what prompted Dracca to extend a credit

Dracca has still a chance to recover some or all of its money as chapter 7 does not discharge or cancel debts for corporations(Madden, 2009). In this case Dracca should register a claim against the assets of VGV. This would be done through filing a Proof of Claim document (POC) alongside with supporting documentation (Legal Information Institute, n.d.). The POC claim will show the amount owed ($100,000) as of the date of bankruptcy filing and as well as any other priority status such as the one Dracca had with VG.

What actions (internal and external) do you recommend to Dracca to remedy the ethical and legal considerations of this