Rogue Bank Case Study

Two individual employees wanted to complete their assignment for their company. But, did their strategy go about accuracy? Karel Svoboda works for Rogue Bank. Svoboda is a credit officer who needed Alena Robles, independent accountant, assists to evaluate and approved his employer’s extensions of credit to clients. In order to complete the task, Svoboda needed to access the nonpublic information about the clients’ personal information related to the company such as their profits and performances. Instead of appropriately following the company policy, Svoboda and Robles created a plan to utilize this data to exchange securities. According to their plan, Robles exchanged the securities of more than twenty unique organizations and benefitted by

Svoboda and Robles both broke the misappropriation and tripper (tippee) theory. In Bailey article, he mentions that the misappropriation theory requires courts to focus on whether a fiduciary relationship, or similar relationship with a "duty of trust or confidence," exists (2010, p.541), and tripper theory obtains an individual who received confidential information from the insider individual. Svoboda and Robles violated the fiduciary duties which are the duty of loyalty and care. When Svoboda brought in an outsider, Alena, to complete the task, he broke the duty of loyalty and care toward his company, but then was disloyal to Robles when Svoboda prepared his own trade security. Under Section 10b and rule 10b-5, if an individual using confidential information and then assist another individual, the individual is liable for the trading of the confidential information if they are aware of the fiduciary duties. As a tippee, Robles was liable for trade securities because he was aware of the policy of the Rogue Bank. Bailey (2010) provides an example regard to the SEC v. Texas Gulph Sulfur, when the Second Circuit held that an investor is prohibited from using non-public information to his advantage, regardless of how the investor received the information and the explanation for this situation was to ensure all investors were provided with equal

When they continue with the unsatisfied situation then it would lead to the court, which will not be good on Svoboda and Robles behalf. “The Court held that under the misappropriation theory, an individual breach a duty to the owner of confidential information by using that information to his advantage in the securities market, constituting a deceptive device prohibited by section 10(b),” Bailey said in his article (2010, p.545). The court can explain the fiduciary duties that were broken within the situation. Miller states in his book that, in some situations, scienter can even be proved by showing that the defendant was consciously reckless as to the truth or falsity of his or her statement (2014, p.123). It should be some kind of evidence stated that Svoboda and Robles schemed was destined for a reason and the information that was recognized was nonpublic. The scheme continues over and over and never did Svoboda and Robles allow the facts to explore. Instead of asking another employee or manager, Svoboda asked in outsider for help because he knew that the employees will not allow the scheme to continue while they are involved. Veliotis article explained an example about a court case In re Worlds of Wonder Sec. Litig. The investor investors brought suit alleging fraudulent statements in an offering prospectus. The court found that the defendants conclusively rebutted an inference of scienter