Imagine a boardroom of these corporate executives, along with their lawyers, accountants, and investment bankers, plotting and planning to take over a public company. The date is set; an announcement is only weeks away. Once the meeting is over, several phone their brokers and instruct them to purchase tons of stock of the Target Company. When the buyout is announced, the share price zooms up and the investors drop these stock shares for millions of dollars in profits. Insider trading is perfectly legal. The officers and directors who owe a duty to stockholders have the same right to trade and purchase the security as the next person does. The primary difference between legal and illegal insider trading lies in the motive. What I plan to explain in this paper is investigating the illegal aspects of insider trading and the scandal of it.
What is insider trading? According to Section 10(b) of the Securities Exchange Act of 1934, it is "any manipulative or deceptive device in connection with the purchase or sale of any security." This ruling served as a deterrent for the early part of this century before the stock market became such a vital part of our lives. But as the 1960"s arrived and illegal insider activity to be a lot, courts were chained by the vague definition. So members of the judicial system were now forced to interpret "on the fly" since Congress failed to resource them with a concrete definition. This resulted in two theories of insider trading liability that have evolved over the past three decades through judicial and administrative interpretation. The classic and the misappropriation theory, is the classic concept is the type of illegal activity one usually thinks of when the words "insider trading" are said. This theory started from the 1961 SEC administrative case of Cady Roberts. This was the Sec’s first time to regulate these security trading’s by corporate insiders. The ruling basiacally brought about the way that we define insider trading - "trading of a firms stock or derivatives assets by its officers, directors and other key employees on the basis of information not available to the public." The Supreme Court officially recognized the classical theory in the 1980 case U.S. v. Chiarella. U.S. v. Chiarella was the first criminal case of insider trading. Vincent Chiarella was a printer who put together the coded packets used by companies preparing to launch a tender offer for other firms.
The Iran-Contra affair survives as one of the most dramatic political scandals in American history. Approximately a decade after Watergate, the Iran-Contra scandal both shocked and captivated the public. The affair began in Beirut, 1984, when Hezbollah, a militant Islamic group sympathetic to the Iranian government, kidnapped three American citizens. Four more hostages were taken in 1985. The conservative Reagan administration hurriedly sought freedom for the Americans. Despite a 1979 trade embargo prohibiting the sale of weapons between the U.S. and Iran, members of Ronald Reagan’s staff arranged an arms-for-hostages deal with Iran in an attempt to free the American hostages in Lebanon. Meanwhile, back in the Americas, Reagan was pursuing an aggressive foreign policy in response to the Cold War. The Reagan administration was doing its best to curb Communist influence in Central and Latin America. In Nicaragua, Reagan wanted to support the democratic rebel Contras against the Marxist Sandinista regime, despite legislation passed in the early 1980s, the Boland Amendment, that made federal aid to the Contras illegal. In 1985, Oliver North, a staff member in the National Security Council, devised the scheme to divert surplus funds from weapons sales with Iran to the Contra cause in Nicaragua, violating the Boland Amendment. Following public exposure of the scandal, Oliver North and many other members of Reagan’s staff were put on trial; however not a single one of them was appropriately punished. Each person involved was either pardoned, granted immunity or had convictions overturned. The Iran-Contra scandal and its aftermath exposed both the executive branch’s lack of accountability to the American people and the other branches of g...
William Evan and Edward Freeman, in their essay “A Stakeholder Theory of the Modern Corporation,” argue that the objective of a company and its managers is not only to maximize profit for its owners and stockholders, but also to balance the benefits received or losses incurred by other stakeholders—employees, suppliers, customers, and the local community, all of whom may be influenced by company decisions. As the owner of MSO, your aim is ostensibly to maximize profits for yourself, but unlike most other indicted CEOs, you have not tried to obtain personal gains at the expense of the stakeholders of your enterprise. Rather, the charges that have been brought against you are for your dealings with another company; in this day and age where investors bemoan the lack of ethics of CEOs who use the power of their position in the boardroom to achieve selfish gains at the expense of their own company and its stakeholders, the charges of insider t...
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
White collar crime is a term created by Edwin Sutherland in 1939 that refers to crimes committed by people of higher social status, companies, and the government according to the book “White-Collar Crime in a Nutshell” by Ellen Podgor and Jerold Israel. White collar crimes are usually non-violent crimes committed in order to have a financial-gain (Podgor and Israel 3). A very well known white collar crime that has even been taught in many history classes is the Watergate scandal. This is a white collar crime that was committed by government authorities. Watergate was a crime that shocked the nation.
Enron’s management style was apparent from the early years of the organization. In 1987, traders in New York manipulated transactions so it would appear as though volume was higher. Falsified transactions significantly increased the traders’ bonus pay out. A truly virtuous manager would deal with unethical behavior by swiftly dismissing those involved. Sadly, Chairman Kenneth Lay and his management team chose to keep the traders on payroll because “said the company needed the revenue” (Fowler, 2002). This event may have been the earliest indication of unethical behavior within the organization.
Have you ever imagined a game played with rules that were adjusted to one of the player’s likings and style and how unfair that would be to the other players? Alex Rodriguez was recently suspended for the entire 2014 season over accusations of taking performance enhancing drugs and having ties with the biogenesis clinic. Steroids have marked a low point in time for sport’s reputations as the steroid phenomenon carries on. Performance-enhancing drugs include any substance taken to perform better athletically. This term is referenced often and typically refers to steroid use in sports by professional athletes. Steroids are taken by swallowing or injecting into the muscle. Users take steroids on a schedule known as a cycle, in which they "stack" or "pyramid" their doses. Doctors may prescribe steroids to patients for legitimate medical purposes such as: loss of function of testicles, low red blood cell count, delayed puberty and debilitated states resulting from surgery or sickness. However, today athletes will go to many lengths to increase athletic ability, including: steroids, HGH, Amphetamines, and even animal or human organs. “The most common illegal source is from smuggling steroids steroid’s into the United States from the countries such as Mexico and European countries. Smuggling is easier because a prescription is not required for purchase of steroids”(Anabolic Steroids). Although steroid use has several great pros that make it seem like an excellent supplement to one's exercise routine, they also have some very serious side effects. For one, there are a great many psychiatric consequences involved in taking steroids. Many individuals report severe depression during and after stopping use (Chiras, 2005). ...
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
The short story of “A Scandal in Bohemia” by Conan Doyle relates to the BBC crime drama series Sherlock episode “A Scandal in Belgravia”. BBC crime drama was filmed based on the short story that Conan Doyle wrote. The film and the text is based on a similar concept, but contains different details of information. There are three comparisons that is easily identified such as theme, characters and setting. These differences make the text and the film different.
Lately, the top story in the news day after day, months after months have been about William Jefferson Clinton, also known as Bill. Who could blame them, there is nothing better than a story out of the ordinary, especially one with presidential status. For the past months he has been the most talked about figure, being the essential topic for news, talk shows, late night comedy and even going as far as the big screen. Talk about 'Primary Colors' and 'Wag the Dog.' What has gotten to me the most however, were the constant flow of Republicans, along with a few Democrats, who just want to say how shocked and embarrassed they are along with the people of the United States.The president had not just become the most talked about figure, but also one history had ever seen, so far that is, breaking the record and becoming a topic of conversation and debate 'twenty-four seven.' The people, who I think were most affected by this crisis and feel very sad for, are the Republicans, since they had lost severe amount of sleep over the president's bedroom crisis. They had to perform their republican duties by shocking our brains with the president's affair with Monica Lewinsky. We had to ignore the rest of the world news and its issues while they plough through the valley of lies, abuse of power and something they called high crimes and misdemeanors.
This case study is not about Ms. Stewart direct participation with illegal insider trading as the media had steered the public to believe. To begin, Ms. Stewart received a phone call from Ann Armstrong, her assistant, stating that Peter Bacanovic, her stockbroker, “thinks ImClone is going to start trading down.” (Arnold, Beauchamp, Bowie, 2013, p. 390) Although Ms. Stewart was not able to get a hold of Peter, she talked to his assistance, Douglas Faneuil,
The stock market is an enigma to the average individual, as they cannot fathom or predict what the stock market will do. Due to this lack of knowledge, investors typically rely on a knowledgeable individual who inspires the confidence that they can turn their investments into a profit. This trust allowed Jordan Belfort to convince individuals to buy inferior stocks with the belief that they were going to make a fortune, all while he became wealthy instead. Jordan Belfort, the self-titled “Wolf of Wall Street”, at the helm of Stratton Oakmont was investigated and subsequently indicted with twenty-two counts of securities fraud, stock manipulation, money laundering and obstruction of justice. He went to prison at the age of 36 for defrauding an estimated 100 million dollars from investors through his company (Belfort, 2009). Analyzing his history of offences, how individual and environmental factors influenced his decision-making, and why he desisted from crime following his prison sentence can be explained through rational choice theory.
But since the latter part of the 1960’s, stricter enforcement of insider trading practices has been put into place because of financial scandals. The first to be discussed is a concrete definition of “insider trading” as it is discussed in this essay. According to the “European Communities 1989 Insider Dealing Directive”, insider trading is the dealing on the basis of materials, unpublished, price-sensitive information possessed as a result of one’s employment. (Insider Trading)” Ivan Boesky pleaded guilty to the biggest insider-trading scheme discovered by the United States Securities and Exchange Commission (SEC). He made $200 million by profiting from stock-price volatility in corporate mergers.
The end of 2001 and the start of 2002 saw the end of a period of magnified share prices and booming businesses. All speculations of misrepresentation came to light and those firms which once seem unconquerable were now filing for bankruptcy. Within this essay, I shall discuss the corporate governance mechanisms and failures which led to the Enron scandal resulting in global corporate governance reforms being encouraged.
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
Have you ever invested in the stock market? If so, do you know where your money is really going? The stock market is a risky business and it can make or break people’s lives. The stock market is used to daily to keep America on its trembling feet; it’s also being used at this very moment to cheat people out of money for personal gain. This happens every day in the stock market and its evolving rapidly, super computers that can trade faster than a blink of an eye, social media trends that can predict share values, and intricate stock market schemes that are getting harder and harder to find and take down. While the stock market keeps the world turning and the economy steady, the stock market is also being used in manipulative ways that are not always legal.