/wEPDwUKLTc4MT
ed
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Week 7: Doing Business - Discussion
SOX and Insider Trading (graded)
Review Problem 5 of Chapter 21, found on page 764 of your e-book. Let's look at
corporate malfeasance, both specifically as in the case of Mr. Winans, and more
generally, at companies across the country. It seems as though there is an outbreak of
corporate "bad ethics" that is translating into escalating costs for compliance and
policing.
Along with the SEC and their policing and efforts at ending bad business practices that
relate to the stock market, we also have the Sarbanes-Oxley Act, also known as
SARBOX, or SOX, which is becoming a big buzzword in the business world. We will look
at that here and in the other thread. As part of that discussion, start thinking about the
different ways different officers of the company will look at and use or follow SOX (i.e.,
the CEO, CIO, and CFO).
To start this threaded discussion, let's look at the conduct of Mr. Winans and his
coconspirators. Was their conduct illegal under the Securities and Exchange Act and,
more specifically, Section 10(b) and Rule 10b-5? If so, how? If their conduct was not
illegal under Section 10(b) and Rule 10b-5, explain why not.
Was their conduct unethical? Why or why not?
Responses
Responses are listed below in the following order: response, author and the date and time the
response is posted.
Response
423439807,423743
Author
419390639
Date/Time
0
Week 7 Discussion 2
- Enron and Professor Devine
Others
12/5/2012 1:30:13 PM
We have to wonder how effective laws and regulations are at deterring this type of conduct and
the conduct we hear about in the news. Or even internal company policies. For example, you
might be interested to read the Enron Code of Ethics:
http://www.thesmokinggun.com/documents/crime/enrons-code-ethics
Class: Weren't there laws already on the books prior to SARBOX that prohibited this type of
conduct? How many laws are enough? How many are too much?
Ginger
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RE: Week 7
Discussion Carletta Jones
2 - Enron
12/14/2012 8:48:41 PM
and Others
The Securities Act of 1933 was already in place prior to the SARBOX that regulated
security fraud. "The Securities Act serves the dual purpose of ensuring that issuers
selling securities to the public disclose material information to investors, and that any
securities transactions are not based on fraudulent information or practices"
http://www.law.cornell.edu/wex/securities_act_of_1933
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RE: Week 7
Discussion Dana Smicklas
2 - Enron
and Others
12/15/2012 6:39:22 PM
THere were laws prior to SOX, but who had oversight over them? Who monitored
them?
422855613,423682
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419390639
RE: Week 7
Discussion Latrice Donaldson
2 - Enron
and Others
12/12/2012 7:22:18 PM
Good evening Dr. Devine and class members. Yes, there were laws already on the
books prior to the Sarbane-Oxley Act. The Securities Act of 1933 was the dominant
regulatory mechanism prior to the SARBOX. The 1933 Act required that investors
receive relevant financial information on securities being offered for public sale, and it
prohibits deceit, misrepresentations, and other fraud in the sale of securities.
The SEC enforces the 1933 Act requiring corporations to register stock and securities
they offer to the public. The registration forms contain financial statements and other
disclosures to enable investors to make informed judgments in purchasing securities.
The SEC requires that the information companies provide be accurate and certified by
independent accountants.
To be honest, there can never be enough laws. Let's be real, just as soon as a law is
written, loopholes are found as if the law was literally written in 2.5 seconds. To
address the loopholes, more laws are added to ensure that these cracks/loopholes are
not ignored; tat is just what happened with the 1933 Act; there were loopholes in it.
Reference:
http://www.dummies.com/how-to/content/taking-a-look-at-a-sarbanesoxleyoverview.html
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RE: Week
7Discussion
Professor Devine
2 - Enron
and
Others
12/13/2012 10:49:24 AM
Good thoughts, Latrice. Additionally, even with laws on the books,
enforcement also needs to be there. There have been questions raised in
recent years about the efficiency of the SEC.
Ginger
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RE: Week
7Discussion
Professor Devine
2 - Enron
and
Others
12/15/2012 4:04:07 PM
It sure seems like this is the case, Latrice. And questions raised about the
SEC and other governmental agencies in charge of enforcing these laws.
Where were they to help prevent "crises?"
Ginger
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423682204
RE: Week
7Discussion
Latrice Donaldson
2 - Enron
and
Others
12/16/2012 6:02:17 PM
Good evening Dr. Devine. In response to your last post, I
found an interesting article and you may have already read
it, but just in case not, the URL is
http://www.smithlaw.com/publications/051006SecuritiesAlert2.pdf.
Now this article states that the final loopholes in Security
Class Actions was resolved, but I just really do not think that
will ever be the case.
Reference:
http://www.smithlaw.com/publications/051006SecuritiesAlert2.pdf
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RE: Week
7Discussion Anthony Fletcher
2 - Enron
and Others
12/11/2012 9:25:05 PM
I personally doubt that the Enron scandal prompted all companies to
suddenly write up and incorporate a Code of Ethics. Almost all major
companies across the country had one already established. What I want
to point out is whether or not that Code of Ethics for Enron was just in
text or whether it was actually enforced. To me, a Code of Ethics is
something that must be consistently and continuously instilled into all
employees' minds. It should be a constant reminder of what the company
expects out of its' employees. Prior to Enron, company Code of Ethics
policies were simply just ink on a piece of paper in my opinion. Yes
companies had policies, but where they really enforced? It took a large
company, such as Enron, to finally bring to light what was probably
happening in many companies other than Enron, and the importance of
following through with the inked company Code of Ethics already
established for so many firms.
Do I think there are too many laws sometimes? Absolutely. I don't think it
was absolutely necessary to create a new law, SOX, but it sure
established itself in the industry and has made company executives think
twice before engaging in illegal activity.
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RE: Week
7Discussion
Professor Devine
2 - Enron
and
Others
12/12/2012 7:40:49 AM
Good points, Anthony. Clearly, Enron was devastating to many and in many
ways has changed the accounting and auditing industries. Undoubtedly, such
conduct went on before and has since, but the Enron case did receive media
coverage that informed the public in ways that perhaps was unprecedented.
Of course, I was living in Houston at the time, so I may have seen more
coverage than the rest of the country did.
Ginger
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RE: Week
7Discussion Jamie Blea
2 - Enron
and Others
12/9/2012 7:57:38 PM
I work in HR, and SOX Compliance is a common phrase in my world, specifically
around files for associates. I personally know, that my department works very hard to
keep up with the latest updates and to continually make sure that our company is
compliant. It is very hard to keep track of all the small details. I believe there are
many laws, some are necessary, but I don't know if it is now too much.
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RE: Week
7Discussion Julie Hicks
2 - Enron
and Others
12/10/2012 7:03:38 AM
I think we have had several laws related to prevention of Business/Financial Fraud
such as Detection and Disclosure Act (1986), Health Insurance Portability and
Accountability Act of 1996 (HIPAA), Gramm-Leach-Bliley Act of 1999 (GLBA). But, in
spite of all these laws we have had major savings and loan scandal in early 1980s,
subsequnetly the energy and telecommunication companies’ frauds in the 1990s. And
then we had Enron episode wherein Enron filed bankruptcy after disclosing major
discrepancies in revenues and liabilities in its financial reports In 2001. Which
ultimately led to SOX. What is different about the SOX is that it has greatly affected
the awareness of and attention to fraud. Management of public companies has to
accept responsibility for fraud as per SOX and financial auditors have to be active in
detecting fraud to comply with SOX.
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RE: Week
7Discussion
2 - Enron Garrett Jones
and
Others
12/10/2012 8:04:37 AM
As Julie pointed out there were indeed already many laws already on the
books prior to SARBOX that prohibited this type of conduct. Unfortunately as
laws are put in place many unethical corporations will look for loopholes or
just outright violate the law. SARBOX is much more far reaching than the
laws that came before it and overall it holds more accountability by senior
levels of management. SARBOX does more to protect the investor and more
to punish the company in the event of unethical or illegal decisions. In the
end I feel the act had more to do with returning investor confidence to the
market than anything else.
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RE: Week
7Discussion
2 - Enron Dana Smicklas
and
Others
12/10/2012 9:56:30 AM
I agree with Garrett, by holding executives accountable for the
unethical decisions of the corporation, a decrease in this type of
behavior may be seen. In the past, executives could hide behind
the "corporate vail" and leave with nice bonuses or golden
parachute deals. However, due to Enron and SOX, some of them
are going to jail.
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RE: Week
7Discussion
2 - Enron Conne Mcclure
and
Others
12/10/2012 6:58:52 PM
I agree with my fellows classmates on their
comments on Sarbanes-Oxley Act was the first
piece of legistion in 10 years the force big accounting
business to behave themselves. Since its creations in
2002, I believe it for it time it was enough, ERON,
WorldCom and Tyco International had just happen. Time
has passed and we are able to see the impact of the SOX
on accounting business. structure in the positive and
negative with the act. We are now at a time were it is not
enough due to fall of several finanical institutions in fall of
2008. No company should be too big to fail, it is park of
business.
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421769013
RE: Week
7Discussion
2 - Enron Professor Devine
and
Others
12/10/2012 7:15:43
PM
Excellent start to this discussion and thanks to
all of you who deal directly with SOX compliance
for your observations and experiences. It is clear
that you all believe SOX has had a positive
impact on industry and particularly in protecting
investors. Some argue that cost of compliance
(in time as well) is too high. Do we have a
counter to that argument, class?
Ginger
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RE: Week
7Discussion
2 - Enron Garrett Jones
and
Others
12/11/2012 8:09:27
AM
I believe SOX can be viewed as a necessary evil, yes it does cost
companies far more to remain compliant. But unfortunately the
unethical firms have revealed loopholes in our previous laws. Our
economy can't sustain repeated unethical actions without losing
investor confidence. The attached article brings many of these cost
of SOX arguments to light and I believe one line within the article is
key, "A standard rule of thumb for internal control, however, is that
the benefits should outweigh the costs." I believe the benefits of
SOX do outweigh the costs for the reasons we have discussed
above.
http://www.nysscpa.org/cpajournal/2004/1104/perspectives/p6.htm
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RE: Week
7Discussion Anthony Fletcher
2 - Enron
and
12/13/2012
5:24:55 PM
Others
I agree with Garrett
here. Remaining
compliant is a necessary
evil, but continuous
unethical practices will
not only put a business
out of business, but also
put our economy into a
downward spiral. SOX
and the Enron situation
has brought on so much
media attention that
companies must stay
honest and act with
integrity to remain in a
positive light with
consumers. Ultimately,
consumers have the
largest impact on the
success or failure of a
company. Unethical acts
are vitally detrimental to
a consumers' image of
that company. It is
MUCH harder to turn a
negative image to a
positive one than it is to
do the opposite.
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421781247
RE: Week
7Discussion
Christopher Nordone
2 - Enron
and
Others
12/12/2012 8:38:32
PM
I think a fair argument to make about
being compliant and it being to costly
in time and money is that a short-term
loss to be compliant can lead to long
term gain. If businesses like Enron
were ethically compliant, then there
would not have been this huge
scandal, they would have not have had
to file for bankruptcy, shareholders
would not have lost $11 billion and
they very well could be still in
business. Instead they chose the quick
path, took advantage of fraudulent
accounting, achieved huge profits and
then it all came crashing down in and
instant. Changing how an organization
works may cause a loss of profit for a
short time, but in the long run it will
keep them in business and maintain a
good public image.
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RE: Week
7Discussion
Linda Sue Martin
2 - Enron
and
Others
12/12/2012 9:04:25
PM
I'm not sure I can counter the
argument about the high cost. I was
the IT Manager at the time SOX was
implemented. Oh my what we had to
put into place in order to meet the
regulations. It was a bit much. A fill set
of detailed policies and procedure to
cover the financial data. And the ability
to provide data recovery in the event
of data failure had to be proven by
testing. We had to design, test, and
prove we had a diaster recovery plan
that worked. We were a small shop
and the VP of Finance made a case
that she could do the financials on a
spreadsheet if she had too. But the
auditors said that was not enough. So
this little company with less than 50
employees, had to put together a
server recovery plan that rivaled a
company with deep pockets. My
department was working late on
December 31 to complete the work.
We did it, but the cost was very high
for the company. There other projects
in the company that could not get
funded due to the SOX effort.
Now having said that, the effort truly
did add form and structure to
previously unwritten policies. And it
was the only way the company would
ever have funded that much effort into
a disaster recovery plan. Most small
business have little to no DR plan,
much less policies and procedure to
cover it all. It was worth all the
expenses and efforts, in my opinion.
423656387,423684
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421781247
RE: Week
7Discussion
Colleen Walker
2 - Enron
and
Others
12/13/2012
12:17:55 PM
I think that the cost versus compliance
issue in dealing with SOX or any other
regulatory agency just depends on the
company. I work for an accounting
firm so we don't have too many
compliance issues except with the IRS.
However since we are working for
clients all the time we do dealing with
the IRS about clients we bill to the
client, so it doesn't cost out firm
anything.
My brother works in the energy
business at a power plant as an
engineer, and he talks/complains
about compliance all the time. He tells
me all the time the huge magnitude of
issues about compliance that they
have to deal with. Most of the
employees he works with just work on
compliance with governmental
agencies. In this case it makes sence
to have so many regulations since it is
a crazy important/dangerous
environment and service/product they
provide.
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RE: Week
7Discussion
Michael Como
2 - Enron
and
Others
12/15/2012
2:47:48 PM
Overall the cost and benefits
of having compliance clearly
outweigh the cost of not
having it. Without
compliance, there is no clear
way for companies to make
sure they are doing what
they say and there is still too
many people who act
unethically. I know for a
previous company I worked
for, the implementation of
the SOX regulations was
really burdensome and a big
hassle. I think part of this
was due to not having
anyone in the field work on
how to implement what we
needed to do. We had
duplicate reports to compile
monthly, but if we knew what
was needed, I feel we would
have had a better solution.
423684921
423656387
RE: Week
7Discussion Professor Devine
2 - Enron
12/15/2012
4:11:44 PM
and
Others
And SOX
compliance has
created an entirely
new industry of
compliance
software and
consultants!
Ginger
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RE: Week
7Discussion
Blanche Meriweather
2 - Enron
and
Others
12/13/2012 6:31:50 PM
I agree Julie;
Acts, codes of Ethics, Business or whatever you know before anyone else
when its time to pull out. People don't always practice what they preach,
wether in office, business or laws. Doesn't all head do the right thing no, they
are the ones with a mind frame of whatever. Catch me if you can.
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RE: Week
7Discussion
Jaye Ambrose
2 - Enron
and
Others
12/13/2012 9:03:53 PM
Julie,
I also agree that SOX has greatly affected the awareness of and
attention to fraud. According to Maleske (2012), Sox has led to
greater internal control of financial reporting, and increased
independence among more focused boards, committees and
directors. SOX imposed new reporting, audit, disclosure and
ethics requirements, and created internal reporting and
whistleblower structures upon which the Dodd-Frank Wall Street
Reform and Consumer Protection Act was built.
Maleske, M. (2012). 8 Ways SOX changed corporate governance.
Retrieved from http://www.insidecounsel.com/2012/01/01/8-ways-soxchanged-corporate-governance?t=department-management&page=2
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422008560
Elements
of Insider
Trading
0
Professor Devine
12/11/2012 8:20:15 AM
Class: Another component of our Week 7 discussion is insider trading. What are the elements of
a 10b-5 insider trading claim?
Ginger
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422008560
RE:
Elements
of Insider Chelsey Houwen
Trading
12/16/2012 5:39:24 PM
Insider trading occurs when persons buy or sell securities on
the basis of information that is not available to the public.
Rule 10b-5 apply to anyone who has access to or receives
information of a nonpublic nature on which trading is based
not just corporate insiders.
422413524,422877
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RE:
Elements
of Insider
Trading
Antonia Whittler
12/11/2012 5:48:18 PM
Prof. Devine and class,
“Insider trading occurs whenever any person or entity (1) trades in any
‘security’ (2) ‘on the basis of’ (3) material, (4) nonpublic information (5)
which has been obtained in breach of a duty of trust or confidence.”
Retrieved on December 11, 2012 from
www.pli.edu/product_files/EN00000000129339/89221.pdf
I found a case involving the owner of the Dallas Mavericks that breaks
down the elements that I found interesting. The SEC v. Mark Cuban
located at www.mwe.com/info/news/wp0109a.pdf. Thoughts anyone?
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RE:
Elements
of
Professor Devine
Insider
Trading
12/12/2012 7:43:50 AM
Thanks for laying these elements out. Of course, what is "material"
information? Who is considered an "insider?" What if I overhear information
at lunch or in an elevator and then act on it? Can I be held responsible? As
was mentioned above, how do we prove where the information came from--a
spouse, a friend?
And what about defenses to such a claim? Prior trading activity may be a
defense--any others?
Thanks for this case, Antonia. I look forward to hearing from the class.
Ginger
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RE:
Elements
of
Christopher Nordone
Insider
Trading
12/13/2012 11:57:56 AM
A person that has access to material information that is not
available to the public which can be used to their advantage, or
someone else's advantage, in trading stocks can be considered an
insider. Material information is information that is not available to
the public and can have a direct impact,even if it is a small one, on
the pricing of a stock. This is not only limited to information that
can positively influence the stock price but can also be information
that will result in a decline of stock prices. You cannot be held liable
for overhearing a conversation that contain non-public material
information and using it to make trades on the market. This
happened to Barry Switzer who happened to overhear a CEO
speaking to his wife while Switzer was sunbathing and used the
information to trade stock. Using this defense the SEC found him
innocent of insider training.
(http://www.andrewskurth.com/pressroom-publications-592.html)
Therefore claiming to have simply overheard the information can
also be used as a defense to an insider trading claim.
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RE:
Elements
of
Joseph Waldrup
Insider
Trading
12/12/2012 9:50:26 PM
For purposes of insider trading, the definition is anyone who trades
a company's shares based on material non-public knowledge.
Insiders have to comply with strict disclosure requirements with
regard to the sale or purchase of the shares of their company. If
someone hears something and they were not initially supposed to
hear the information, they can be responsible if acted upon. I think
it in case like that, it's hard to hear where the information came
from. Open and honest communication would be the only
resolution.
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RE:
Elements
of
Conne Mcclure
Insider
Trading
12/12/2012 6:11:35 PM
Don't we get back to personal and professional ethics, If you work
for an origanization and over hear someone in the elevator and pass
that information onto your friend the broker, I believe you can be
held responsible for the information you passed on, it is difficult to
prove when the information was passed onto. Don't the employees
have a unwritten obligation not to pass on information that might to
be used to gain or abuse by others.
The insider can be the the person who should not of been speaking
in the elevator and the person overhearing the information (see link
below from SEC). In the Supeme Court in the case of United States
v. O'Hagan, it was determine that company information is owned by
the company.
http://www.sec.gov/news/speech/speecharchive/1998/spch221.htm
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RE:
Elements
of
Colleen Walker
Insider
Trading
12/12/2012 9:47:41 PM
I agree with Conne, information can be passed over so
many barriers. Overhearing someone from a different
company somewhere, seeing an email somewhere and
other things like that. Insiders are people that have
access to information about the company, but even if they
aren't in the company they can hear something. Someone
could talk in their sleep and give away information. There
are so many ways to get information, how can it be
regulated? That is the questions that needs to be clarified
in the laws and elements of insider trading.
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RE:
Elements
of
Garrett Jones
Insider
Trading
12/12/2012 8:00:26 AM
Modified:12/12/2012 8:15 AM
I think an "insider" can best be described as anyone who has access
to non-public material about a company, this can include anyone
from a spouse of an employee, to stockholders, all the way to
CEOs. The access to non-public information is key in determining
who an "insider" is. "Material" information can best be described as
information which would be likely to affect a stock's price once it
becomes public information, such as mergers or acquisitions. I
currently work for a large investment bank and much of what I see
on a daily basis there is no public knowledge of, on a yearly basis I
must report my own as well as any of my family members
investment history for the year.
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RE:
Elements Julie Hicks
of
12/12/2012 8:32:22 AM
Insider
Trading
For purposes of Section 10(b) and Rule 10b-5, insiders are defined
as (1) officers, directors, and employees at all levels of the
company; (2) lawyers, accountants, consultants, and other agents
and representatives who are hired by the company on a temporary
and non-employee basis to provide services or work to the
company; and (3) others who owe a fiduciary duty to the company.
The misappropriation theory outlaws trading on the basis of
nonpublic information by a corporate “outsider” in breach of a duty
owed not to a trading party but to the source of the information.
In the Matter of Cody, Roberts & Co.,14 the SEC announced that
the duty of an insider who possesses material nonpublic information
is to either (1) abstain from trading in the securities of the company
or (2) disclose the information to the person on the other side of
the transaction before the insider purchases the securities from or
sells the securities to him or her.
Prior trading activity is a defense to the insider trading claim. SEC
Rule 10b5-1 also created for insiders an affirmative defense if the
insider can demonstrate that the trades conducted on behalf of the
insider were conducted as part of a pre-existing contract or written
binding plan for trading in the future. For example, if an insider
expects to retire after a specific period of time and, as part of
retirement planning, the insider has adopted a written binding plan
to sell a specific amount of the company's stock every month for
two years and later comes into possession of material nonpublic
information about the company, trades based on the original plan
might not constitute prohibited insider trading.
References:
Securities and Exchange Commission v. W. J. Howey Co., 328 U.S.
293, 66 S.Ct. 1100, 1946 U.S. Lexis 3159 (1946).40 SEC 907 §
(1961).
Stuart Stein. (2001). New standards for "legal" insider trading.
Community Banker
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RE:
Elements
of
Jamie Blea
Insider
Trading
12/12/2012 5:27:17 PM
As described by Julie,insiders can be and employees
within the company, any representatives with the
companies, and others who owe a duty to the company.
Friends, spouses, and others around these three
categories may be proved to be holders of inside
knowledge. Most of this is set in precedent cases, as it is
hard to prove how inside information was given. As in my
previous post, a case brought again an employee's spouse
was rejected.
In this reference and website:
http://www.sec.gov/spotlight/insidertrading/cases.shtml,
99% of the cases are employees of the company.
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RE:
Elements
of
Jaye Ambrose
Insider
Trading
12/14/2012 2:03:04 PM
Modified:12/14/2012 2:09 PM
The Business Dictionary defines material information as
any information about a company or its products that is
likely to change the perceived value of a security when it
is disclosed to the public.
An insider is someone who has knowledge or access to
non public information.
Overhearing information at lunch or in an elevator
doesn't make you responsible when it comes to insider
trading, so long as you don't know that the material is
non public information. If you are aware that the
information is non public and you work for the company
then you would be responsible.
This link
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2379
gives insights to why insider trading is hard to define,
prove,and prevent, and this link
http://www.ehow.com/how_2140347_defend-against-insidertrading-charges.html discusses how to defend against
insider trading.
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RE:
Elements
of
Professor Devine
Insider
Trading
12/15/2012 4:13:29 PM
Some argue that insider trading should not be illegal and
is a victimless crime. Agree or disagree, class?
Ginger
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423685549
RE:
Elements
of
Linda Sue Martin
Insider
Trading
12/15/2012 10:17:38
PM
I can see both sides of the argument on the insider
trading. There can be some grey areas that make the
argument even harder to defend. So I'll answer the
question from an ethical stance. Lets assume you are the
repair man for the lottery ball machine. You happen to
know that there is a flaw in the unit and due to this flaw
it will favor certain numbers. You order the part to fix the
machine but it will not be in until after the next drawing.
So you buy several lottery tickets with those favored
numbers. There is nothing in your job contract that says
you can not buy tickets. The lottery officials are aware of
the problem, but they let the drawing proceed. The
lottery is worth 50 million. Is it ethical to play since you
know something that gives you an advantage over
others. Applying one of our ethical methods, what would
the headline of the newspaper say. "Repair man wins
lottery using favored numbers, machine broken." Is it fair
to others who are in the game. It does seem like an
unfair advantage over others.
Some corporations will issue a blackout period in which
officers, board members, employees and such are not
allowed to process transactional trades of common stock,
or preferred stock if available. This could frequently occur
during periods of financial announcements or general
company announcement. Anything that pertained to
information that might affect the stock price, which could
be anything. I have sat through company meeting where
there was an announcement made, usually bad news,
but it could also be good news. At the end of the meeting
the VP of Finance stands up and announces that there is
a blackout period in place and would give us the dates. It
could a few days or if the events were of a longer
duration, it could last for weeks. In the case SEC v. Kevin
J. Heron, the SEC sued for insider trading. Mr Heron was
general council (should have known better), corporate
secretary, and insider trading compliance officer
(corporation needs ethics training). It is estimated that
he benefited by $290,000 by processing trades during
the blackout periods. Did it hurt the company or others?
Well, others were not hurt, no one lost money that they
wouldn't have lost otherwise. Was the company harmed?
If company reputation is valued I'd say yes. When the
case became public I would expect the stock price to be
negatively impacted. Apparently there is also a section in
the SOX Act, section 306(a)(1), that includes provisions
about corporate officers processing trades during
blackout periods.
source:
http://www.sec.gov/litigation/complaints/2007/comp20079.pdf
http://www.law.uc.edu/sites/default/files/CCL/regBTR/BTR101.html
423851452
423685549
RE:
Elements Joseph Waldrup
12/15/2012 10:22:27
PM
of
Insider
Trading
In my opinion, Insider trading includes both legal
and illegal conduct. The legal version is when
corporate insiders—officers, directors, employees
and large shareholders, buy and sell stock in their
own companies. When corporate insiders trade in
their own securities, they must report their trades to
the SEC. Many investors and traders use this
information to identify companies with investment
potential, the theory being, if the insiders are buying
the stock, they must know more about their
company than everyone else, so it is a good idea to
buy the stock.
424048615,424130
423967942
423685549
RE:
Elements
of
James Pha
Insider
Trading
12/16/2012 10:35:44
AM
I was standing on the fence with this, so I did a little more reading online
with this insider trading, this is what I was able to pull from
investopedia.
"Insider trading can be illegal or legal depending on when the insider
makes the trade: it is illegal when the material information is still
nonpublic--trading while having special knowledge is unfair to other
investors who don't have access to such knowledge. Illegal insider
trading therefore includes tipping others when you have any sort of
nonpublic information. Directors are not the only ones who have the
potential to be convicted of insider trading. People such as brokers and
even family members can be guilty."
"Insider trading is legal once the material information has been made
public, at which time the insider has no direct advantage over other
investors. The SEC, however, still requires all insiders to report all their
transactions. So, as insiders have an insight into the workings of their
company, it may be wise for an investor to look at these reports to see
how insiders are legally trading their stock. "
So to really answer the question, it's all about timing as it explains here.
Nothing wrong with the insiders trading, just as long its fair across and
board with all the other investors. Insiders just can't have any advantage
where it puts other investors in a disadvantage situation. Insiders
trading is legal, until it becomes illegal... Hopefully that makes sense.
Read more:
http://www.investopedia.com/terms/i/insidertrading.asp#ixzz2FEkuOLLD
424130818
424048615
423967942
RE:
Elements
of
Michael Como
Insider
Trading
12/16/2012 3:10:39
PM
I disagree and think insider trading
should remain illegal. It is unfair to
have knowledge that no one else has
access to and then use it gain from it.
Once the information is public, then by
all means go for it. This is a form of
cheating if you want my honest
opinion. I agree though it is about
timing. Once a report is made public,
those that have that information can
still get an advantage with the correct
timing. If a report comes out at 7 am,
then at 7 am, those with that
information probably are jumping right
on it.
424130818
424048615
RE:
Elements
of
Professor Devine
Insider
Trading
12/16/2012
6:25:52 PM
We can certainly make an
argument that there are
victims to insider trading
when we look at scandals of
recent years and the
significant losses investors
suffered.
Ginger
422987766
422413524
RE:
Elements
of
Antonia Whittler
Insider
Trading
12/13/2012 5:27:35 PM
Prof. Devine and class,
Material information is information that is pertinent and
would affect the individual’s buying or selling decision.
Material information includes pending takeovers, drops
in quarterly earnings, pending declarations of a large
dividend, and possible lawsuits on product line.
(Jennings, 2012, p. 746). An insider is “[a]nyone who
has access to information not readily available to the
public. Officers, directors, and large shareholders are
included in this group. (Jennings, 2012, p. 747).
Prof. Devine, whether or not you could be held
responsible for securities violation if you overhear
information at lunch or in an elevator and act on it
cannot properly be determined without more facts.
Where do you work at? Who did you hear it from?
What relationship do you have with the person and/or
the company that is involved? One could argue yes on
a misappropriation theory, if not the traditional
securities violation theory, but we need more
information. Thanks
Defenses to insider trading:
(1) Demonstrating that the material nonpublic information
was not a factor in the trading decision; or
(2) The trade was made pursuant to a contract,
instructions given to another, or a written plan that “did
not permit the person to exercise any subsequent
influence over how, when, or whether to effect
purchases or sales, and where the plan, contract, or
instructions was created before the person had inside
information.
Retrieved on December 13, 2012 from
www.en.wikipedia.org/wiki/SEC_Rule_10b5-1
423742422
422413524
RE:
Elements
of
Dana Smicklas
Insider
Trading
12/15/2012 6:37:08 PM
If anything, I think Mr. Faure should be held accountable for insider
trading because he only told Mr. Cuban of the offering and not the
rest of the shareholders. I'm not saying that what Mr. Cuban did
was ethical, but if I were in his position, I probably would have
done the same thing based on the conversation. Why would Mr.
Cuban want to lose money? However, why would Mr. Faure tell him,
knowing that he would do what he did to try and avoid a loss.
422336397
422008560
RE:
Elements
of Insider Joseph Waldrup
Trading
12/11/2012 9:45:56 PM
In order to establish a claim under Rule 10b-5, plaintiffs, including the SEC must show
(a) Manipulation or Deception; (b) Materiality; (c) "In Connection With" the purchase
or sale of securities; and (d) Scienter. Private plaintiffs have the additional burden of
establishing (e) Standing - Purchaser/Seller Requirement; (f) Reliance; (g) Loss
Causation; and (h) Damages. In a case for insider trading, anyone who uses insider
information can be held liable.
Here's one of the more famous cases of insider trading:
http://corporateinsiderstrading.wordpress.com/2012/02/02/albert-h-wiggin-themarket-crash-millionaire/
422201771
422019428
422008560
RE:
Elements
of Insider
Trading
Julie Hicks
12/11/2012 9:00:00 AM
Rule 10b-5 is a general prohibition against fraud or deceit in security transactions. Rule
10b-5 is a general prohibition of fraud and deceit in the purchase or sale of securities.
Rule 10b-5, which states that it is unlawful for any person, directly or indirectly, to
- Employ any device, scheme, or artifice to defraud.
- Make any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in the light of the circumstances under which
they were made, not misleading.
- Engage in any act, practice, or course of business that operates, or would operate, as
a fraud or deceit on any person in connection with the purchase or sale of any security.
Section 10(b) and Rule 10b-5 are often referred to as the antifraud provisions of the
1934 Act. Courts have held based on this rule that investors can sue, and the scope of
liability is broad - potentially, a wide range of participants, from brokers to issuers to
company employees may be liable, provided that the fraud was "in connection with" a
securities purchase or sale.
References:
http://www.law.cornell.edu/wex/securities_exchange_act_of_1934
422201771
422019428
RE:
Elements
of
Blanche Meriweather
Insider
Trading
12/11/2012 5:47:51 PM
great job Julie;
Insider trading" is a term subject to many definitions and connotations and it
encompasses both legal and prohibited activity. Insider trading takes place
legally every day, when corporate insiders like officers, directors or
employees – buy or sell stock in their own companies within the confines of
company policy and the regulations governing this trading.
423456856,424132
422167454
422008560
RE:
Elements
of Insider Jamie Blea
Trading
12/11/2012 4:30:50 PM
In reading an interesting article from the NY Time online, most insider trading
information is gathered from a working relationship. Friendships and marital
relationships when it comes down to insider trading are hard to prove. The US.
Chestman rejected a marital relationship.
http://dealbook.nytimes.com/2012/07/30/the-evolving-contours-of-insider-trading/
424132212
423456856
422167454
RE:
Elements
of
Edwin Scales
Insider
Trading
12/14/2012 9:37:51 PM
Business proprietors, partnerships and corporations must be formed
specifically to avoid collusion or provide information in which someone could
have an unfair advantage in profiting. General partners and limited partners
should not be managing the company.
Enron took Arthur Anderson down the ethical drain because they audited and
advised the misleading company. This put Arthur Anderson into a position
similar to the Enron executives because their motivations were contradictory.
Section 10(b) is more important than ever because a whistle blower can
exists outside the company and have huge implications in the public markets.
424132212
423456856
RE:
Elements
of
Professor Devine
Insider
Trading
12/16/2012 6:28:37 PM
Edwin: We have seen whistleblower cases in recent years where
employees stepped up and reported illegal conduct, only to suffer
negative consequences, despite the legal whistleblower protections
in place. This may inhibit future whistleblowing.
Ginger
422262227
investopedia
0
Bryan Anderson
12/11/2012 7:36:06 PM
Investopedia defines insider trading as “Insider trading can be illegal or legal depending on when the
insider makes the trade: it is illegal when the material information is still nonpublic--trading while
having special knowledge is unfair to other investors who don't have access to such knowledge. Illegal
insider trading therefore includes tipping others when you have any sort of nonpublic information. One
of the biggest cases of our lifetime involving insider trading involved Martha Stewart. Martha Stewart
was told by her friend Sam Waksal that his company ImClone’s cancer drug had been rejected by the
Food and Drug Administration before this information was made public. This rejection was a huge
blow to his company and the price of its stock went down dramatically. However, Martha Stewart
wasn’t financially hurt because she had her broker sell her 4000 shares before this news was made
public. If this is true, and it should be noted it hasn’t been proven yet, then Martha Stewart is guilty of
insider trading.
Read more:
http://www.investopedia.com/terms/i/insidertrading.asp#ixzz2EnjRdwHe
422737393
422369222
Insider
Trading
0
Michael Como
12/11/2012 11:26:55 PM
The conduct of Mr Winans and his co-conspirators was illegal under the Securities and Exchange
Act and violates Section 10(b) and Rule 10b-5. They provided information in advance before it
was made public and used that information for their own gain. This information was not provided
to the public until usually the next day. This is insider trading and they used tippees as well to
help facilitate the sales. Their conduct was unethical because they took advantage of this inside
information and made money of it before anyone else had the same opportunity. This is cheating
and very unethical.
422737393
RE:
Insider
Trading
422369222
Edwin Scales
12/12/2012 10:35:02 PM
Enron is a clear dilemma of unethical behavior permitted by law. Sadly, many
employees were not permitted to sell company stock If they wanted to sell because
they were in what is called a black out. The officers explained publicly that the
company was well structured and had strong financials while they were selling stock
privately because they were not prohibited from trading like the rank and file
employees.
Financials were required 10 days after the end of the month of openings. Now they
time period has been reduced to two days. These are measures designed to keep
clients well informed about company financials in order to prevent executives from
defrauding or misleading investors. These issues are important because we are living
in a world where corporate retirement pensions are being managed by companies
trading securities. We can not tell the 75 year old widow, “oh I’m sorry we made a
mistake 15 years ago and can no long contribute to your retirement benefits.”
424135648
422593310
SOX and
Insider
Trading
0
Antonia Whittler
12/12/2012 5:45:17 PM
Prof. Devine and class,
“Insider trading occurs whenever any person or entity (1) trades in any
‘security’ (2) ‘on the basis of’ (3) material, (4) nonpublic information (5) which
has been obtained in breach of a duty of trust or confidence.” Retrieved on
December 11, 2012 from
www.pli.edu/product_files/EN00000000129339/89221.pdf .
Yes, this information was obtained by Mr. Winans in an employment position,
which provided that all of the nonpublic information obtained within thus said
position was confidential meaning that it could not be disclosed to anyone
else. Section 10(b) has been broadly applied by courts so a court could find
that this action was a violation of this rule. Their conduct was also unethical
because they using confidential information to make money that they would
not otherwise have been able to do.
424135648
RE: SOX
and
Insider
Trading
422593310
Professor Devine
12/16/2012 6:35:10 PM
Importantly, this type of conduct may also support state claims:
http://www.natlawreview.com/article/delaware-supreme-court-holds-insider-tradingclaims-alleging-misuse-confidential-corporate-i
Ginger
422633953
SOX and
Insider
Trading
0
Latrice Donaldson
12/12/2012 7:10:41 PM
Good evening Dr. Devine and class members. In response to the first question, "Was
their conduct illegal under the Securities and Exchange Act and, more specifically,
Section 10(b) and Rule 10b-5?", I would say yes. If I am interpreting my reading
correctly, Winans and Felis violated the federal securities laws (Section 10(b) and
Rule 10b-5 due to their scheme of utilzing the federal mail wire fraud statutes, 18
U.S.C. 1341, 1343, which prohibited the use of the mails or of electronic
transmissions to execute any scheme or artifice to defraud, or for obtaining money or
property by means of false or fraudulent pretenses, representations, or promises.
Winans violated his fiduciary obligation to protect his employer's confidential
information by exploiting that information for his personal benefit, all the while
pretending to perform his duty of safeguarding it; clearly Winans and Felis' conduct
was unethical; they knew what they were doing was wrong, but still continued with
their scheme.
References:
http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=us&vol=484&invol=19
http://www.law.cornell.edu/wex/securities_exchange_act_of_1934
422635956
SOX and
Insider
Trading
0
Jaye Ambrose
12/12/2012 7:14:40 PM
Mr. Winans and his co-conspirators conduct was illegal under the Securities and
Exchange Act based on section 10(b) and Rule 10b-5 which covers the anti-fraud
provisions of the 1934 act. Mr. Winans committed common law fraud because he
and his co-conspirators made a profit off confidential financial information before
it was published.
Their conduct was unethical by notwithstanding the company's conflict of interest
policy, which deemed all news material gleaned by an employee during the course
of employment to be company property and that company policy required
employees to treat nonpublic information learned as confidential.
422736297
RE: SOX
and
Insider
Trading
0
12/12/2012 10:32:12 PM
James Pha
Modified:12/12/2012 10:32 PM
Was their conduct illegal under the Securities and Exchange Act and, more
specifically, Section 10(b) and Rule 10b-5? Yes, their action violated the section
10(b) as the text indicated from the reading. The text states that, "an individual’s
10(b) violation occurs when one side to a securities transaction has information
not generally available to the public and the transaction proceeds without
disclosure." The text states that, "Section 10(b) and Rule 10b-5 (the SEC
regulation on 10(b)) are the antifraud provisions of the 1934 act. These sections
are statutory versions of common law fraud. If the free market is to work, all
buyers and sellers must have access to the same information." So going back to
the question, easily and clearly we see in this case as describe that, "Mr. Carpenter,
who was involved in a private, personal, nonbusiness relationship with Mr. Winans, served
primarily as a messenger for the conspirators." Another description of this violation is,
"nyone who has access to information not readily available to the public is covered under 10(b). Officers, directors, and large shareholders are included in this
group. However, 10(b) also applies to people who get information from these
corporate insiders."
I think alone this is enough for the court and SEC to determine that these acts of
these men are in violation with section 10(b).
Jennings, Marianne M.. Business: Its Legal, Ethical, and Global Environment, 9th
ed.. 9. VitalSource Bookshelf. South Western Educational Publishing, ,
Wednesday, December 12, 2012.
<http://devry.vitalsource.com/books/9781133170624/page/747>
423010506,423444
422855771
0
Who is an
Professor Devine
Insider?
12/13/2012 10:49:52 AM
Class: Another relevant case to consider is the Chiarella case. The Supreme Court in Chiarella
stated, "petitioner had no affirmative duty to disclose the information as to the plans of the
acquiring companies. He was not a corporate insider, and he received no confidential information
from the target companies. Nor could any duty arise from petitioner's relationship with the
sellers of the target companies'' securities, for he had no prior dealings with them, was not their
agent, was not a fiduciary, and was not a person in whom the sellers had placed their trust and
confidence. A duty to disclose under 10(b) does not arise from the mere possession of nonpublic
market information." Ultimately, Chiarella went free.
See: http://www.oyez.org/cases/1970-1979/1979/1979_78_1202/
This gave rise to a debate as to whether the misappropriation or stealing of information from its
rightful owner could give rise to Section 10(b) violations.
Now, let's look specifically at Foster Winans and his tips based on his Heard on the Street
column published in the Wall Street Journal:
1. Did Winans possess any fiduciary duty to any shareholders in the companies he wrote about
in his column?
2. If not, how could we sustain a conviction for engaging "in any act, which operates as a
fraud...upon any person, in connection with the purchase or sale of any security"?
3. Which theory (classical or misappropriation) would give us the strongest case to convict
Winans? (Discuss the elements of the theory you chose and how the facts from the Winans case
satisfy those elements.)
Ginger
423444394,423549
423010506
422855771
RE: Who
is an
Blanche Meriweather
Insider?
12/13/2012 6:17:27 PM
Professor;
An insider is a member of any group of people of limited number and generally
restricted access. The term is used in the context of secret, privileged, hidden or
otherwise esoteric information or knowledge: an insider is a "member of the gang" and
as such knows things only people in the gang know.
Yes, he did posse fiduciary duty because, he talked about things that only the
shareholders knew, he gave out information that everyone had no knowledge of.
423444394
423010506
RE:
Who is
James Pha
an
Insider?
12/14/2012 9:01:25 PM
Hi Blanche, I'm on the same page as you with who is the insider in this case.
I agree that Winans possess fiduciary. In the problem it stated that,
"Notwithstanding company policy, Mr. Winans par- ticipated in a scheme with
Mr. Brant." Mr. Brant is a stockholder, maybe not one of Mr. Winans
company but he is one and he is getting information that others have not
received. Some can argue that this was not a case where Mr. Winans is
giving secrets away of his company, but everyone should consider that there
is no set definition for who is crossing the lines. the text does however state
that, "The language of 10(b) does not really specify what constitutes an
offense of misrepresentation. Determination of 10(b) violations has been left
to the SEC and the courts, which have shown that violations of 10(b) can
take a variety of forms." With this in mind, they can prove that in what Mr
Winanas did is a violation.
Jennings, Marianne M.. Business: Its Legal, Ethical, and Global Environment,
9th ed.. 9. VitalSource Bookshelf. South Western Educational Publishing, ,
Friday, December 14, 2012.
<http://devry.vitalsource.com/books/9781133170624/page/745>
423549933
423010506
RE:
Who is
Latrice Donaldson
an
Insider?
12/15/2012 9:06:56 AM
Good morning Blanche. Your post is right on the money, in my
opinion. An insider is someone who is part of a group, or who works
for a company or an organization and therefore has special
knowledge or influence; clearly, this definition is Mr. Winans. As the
column writer, he did possess pertinent and valuable information and
he abused his fiduciary duty by disclosing the information. This
situation reminds me of the Martha Stewart scandal when she was
accused of insider trading after she sold four thousand ImClone
shares one day before that firm’s stock price plummeted; the charges
of securities fraud were thrown out, Ms. Stewart was found guilty of
four counts of obstruction of justice and lying to investigators, which
in the end she ended up going to prison for a short amount of time. I
also think of the ole saying, "Money is the root to all evil" when I
read this case...clearly, this ole saying is ever so true.
References:
http://dictionary.cambridge.org/dictionary/business-english/insider
http://danielsethics.mgt.unm.edu/pdf/Martha%20Stewart%20Case.pdf
423100137
423010506
RE:
Who is
Edwin Scales
an
Insider?
12/13/2012 8:59:59 PM
Mr. Winans participated in a fiasco surrounding his paper the Wall Street
Journal under the Heard column. The paper’s resources scoured Wall Street
operations for journalistic public publishing. Mr. Winans and some of his Wall
Street Journal colleagues discovered significant events that would predictably
raise the costs of shares or lower their costs.
Mr. Winans knew his behavior was at the least unethical and could result with
fines or incarceration because he intentionally called from a payphone and
used aliases to report the information about particular firms’ transactions
likely to be reported the following day. Mr. Winans is a tippee because he
provided non-public information for a select few collaborators to profit before
the news was widely read. Mr. Winans is also subject to section 10(b)
because his timing is a violation. If an individual can not profit from changes
that they see in a news conference and simultaneously buy or sell stocks
based on the content of the news conference, then a member of the media
can not buy or sell based on sources or reports prior to publication.
424028140
423181495
422855771
RE: Who
is an
Julie Hicks
Insider?
12/14/2012 1:57:46 AM
The actions against Winans are based on the ``insider trading`` rules established by
the agency to enforce the anti-fraud provisions of the 1934 Securities Exchange Act.
This is a long way from what the insider trading rules were meant to stop. They are
aimed at corporate insiders who, using secret information about their own firms, trade
in its stocks. The underlying theory is that they owe shareholders a fiduciary obligation
not to exploit their inside position. But Winans was not an employee of the companies
whose stock was traded by his friends. Nor did he have any ``inside`` information
about them. What he reported were publicly known rumors about them, related by
Wall Street professionals. He plainly had no fiduciary relationship with their
shareholders. If Winans had a fiduciary obligation, it was to his employer. That could
be the basis of the government`s charge, that he misappropriated confidential
information that properly belonged to the Wall Street Journal.
References:
http://articles.chicagotribune.com/1985-01-31/news/8501060812_1_winans-insidersecurities-fraud
424028140
423181495
RE:
Who is
Linda Sue Martin
an
Insider?
12/16/2012 2:11:37 PM
Your comments are right on point. I truly value this discussion as it clears up
issues I’ve long misunderstood regarding insider trading. Winans is not guilty
of insider trading, technology. The information he acquired was based on
news stories about to be published. It will be assumed that the information in
the articles was mostly acquired through investigative reporting. So, the
public also could have investigated and discovered the information.
However, Mr. Winans, like Mr. Chiarella, were not part of the companies and
therefore were not duty bound to them. Did they have information that was
available to others? Seems to me both cases illustrate the information they
processed was actually more deductive than actually factual insider
information. Now having said that, I can understand the split decisions on the
cases.
What Mr. Winans is guilty of is releasing newspaper confidential information.
And the company should have dealt with that issue. Judging from this coverup actions I’d say Winans knew his actions were wrong. One of the reasons
the paper is protecting its information is so that they can be the first to
publish and thereby improve their circulation numbers and from that
revenue. Nothing in Winans release of information affected any of the paper’s
value. So I’m still trying to see the defraud and mails and wire fraud issues.
Source: http://supreme.justia.com/cases/federal/us/484/19/case.html
423367933
RE: Who
is an
Insider?
422855771
Antonia Whittler
12/14/2012 5:16:06 PM
Prof. Devine and class,
No, Winans did not possess any fiduciary duty to any shareholders in
the companies that he learned about from his employment with the
newspaper, but he did owe a fiduciary duty to the newspaper he was
employed with which advised all employees that their nonpublic
information acquired was confidential in nature.
The conviction can be sustained on a misappropriation theory. He
provided this information to others who perpetuated the fraud upon
people in the connection with the purchase and sale of any security.
Misappropriation theory would give us the strongest case to convict
Winans. The misappropriation theory holds that a person commits
fraud in connection with a securities transaction, and thereby violates
10(b) and Rule 10b-5, when he misappropriates confidential
information for securities trading purposes, in breach of a duty owed to
the source of the information.
The misappropriation theory premises liability on a fiduciary-turnedtrader’s deception of those who entrusted him with access to
confidential information. Winans, an employee of the newspaper, was
provided confidential information in his course of employment, and he
participated in a scheme with three others where he agreed to provide
the two stockbrokers with securities-related information that was
scheduled to appear in his columns; based on this advance
information, the two brokers would buy or sell the subject securities.
Mr. Carpenter served primarily as a messenger for the conspirators.
423514198,424133
423225076
0
Week 7 Discussion 2 Professor Devine
- Wrap Up
12/14/2012 8:36:38 AM
Class: It's time to wrap up our last discussion of this term, so you all can focus on taking up the
final examination.
I want to cover a few concepts in more detail that were raised this week: "Classical" insider
trading involves trading by a corporate insider on the basis of material and nonpublic
information. The fiduciary relationship that an insider owes to shareholders "gives rise to a duty
to disclose or abstain from trading" because of the necessity of preventing the corporate insider
from taking unfair advantage of uninformed shareholders.
Thus, early on many prosecutions involving insider trading foundered because no connection
could be found between the insider trading and a fiduciary duty to the shareholders of the
traded security. For example, take a look at the Chiarella v. United States case I mentioned in
an earlier post.
http://www.oyez.org/cases/1970-1979/1979/1979_78_1202/
Certainly, Chiarella took advantage of his inside information as a printer, but did he breach a
fiduciary duty to the shareholders?
Importantly, the Winans case reached the Supreme Court at a time when the law was very
uncertain about a so-called Misappropriation Theory of Insider Trading. The Classical or Fiduciary
Theory was well established, but many inside traders, such as Chiarella, were beating
prosecutions because of the lack of a link of fiduciary responsibility to shareholders of the traded
security. Indeed, there was a period of several years where Misappropriation was a valid theory
of insider trading prosecution in some parts of the country, but not in others. The Supreme
Court divided 4-4, which had the effect of affirming the convictions of David Carpenter and
Foster Winans.
The O'Hagan decision ended the debate about Misappropriation. Inside traders can now be
successfully prosecuted under either the Classical or Misappropriation theory. Inside traders,
beware!
Do you think that the addition of the misappropriation theory is enough to deter potential inside
traders? See the O'Hagan case at:
http://www.oyez.org/cases/1990-1999/1996/1996_96_842/
You can see how this thread addressed TCO H: Given a conflict between corporate stakeholders
over a business decision, evaluate the legal and ethical responsibilities of corporate directors,
officers and controlling shareholders. There are clearly times when there is tension and conflict
between the interests of the various stakeholders of a company. The ethical models we have
covered this term can help resolve daily issues that come up.
If you have any lingering questions about this week's terms and concepts, post them here.
I will be around all weekend if you have questions as you study for the final exam. Give me a
call at 573-445-2778.
Ginger
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RE: Week 7
Discussion Conne Mcclure
2 - Wrap
Up
12/15/2012 5:50:59 AM
From my worker experience I believe that some people will cheat when given the
opportunity and guts to do it, so no I not believe the misappropriation therory is
enough to deter insider trader. I think the punishment is not harsh enough when it
comes to insider trading and other white colar crimes. I also believe that companies
sometime do not want to persue the legal road if the damages that has been done to
the company does the harm them enough to pursue on a legal level regardless if it is
illegal; is it worth it?
To me in case United States v. O'Hagan, he embasialment of about 4.3 million, to me
he should owe the federal government 10 times that amount back because in white
colar cimes the best way to let them know they paid for the crime they committed it
need to hurt them monetary, some jail time and until the dedt is paid they wear a
tracking device. The court was correct in stating that punchment must meet the crime.
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RE: Week
7Discussion Anthony Fletcher
2 - Wrap
Up
12/16/2012 6:31:42 PM
Misappropriation will deter a good number of cheaters from
continuing to cheat, however, it will not deter all cheaters from
insider trading. I think insider trading is going on a lot more than
what people know about, and will continue. I do agree with
Conne on her point that the punishment for such acts should be
harsher. I also think that with the continuous improvements to
technology, insider trading will become easier to identify. This
week's discussion, as well as the the whole session's discussion,
has been incredible and I have learned a great deal. One of my
favorite parts about attending Keller is that we discuss real world
scenarios, and it has really helped me put all concepts and
theories from our text into perspective. It is a great way to learn!
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RE: Week
7Discussion Chelsey Houwen
2 - Wrap
Up
12/16/2012 8:03:10 PM
Yes, people will cheat. Why? I do not know. People
should realize that there are consequences when
he/she cheats. For instance, the lawsuit between
Samsung and Apple . Apple sued Samsung because
they copy their design, etc. I think the judge ruled in
Apple favor.
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RE: Week
7Discussion Blanche Meriweather
2 - Wrap
Up
12/16/2012 9:00:16 PM
great point Chelsey;
when you cheat you will pay, a nine-member jury at a San Jose,
California court awarded Apple $1.05 billion in damages after
finding that Samsung infringed on six patents. It’s less than half of
what Apple claimed. But, the judge, who is yet to give her verdict,
could triple the amount, since the jury said Samsung’s infringement
was willful. It really was nine but, they got paid for only six patents.
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RE: Week
7Colleen Walker
Discussion
12/15/2012 8:31:21 AM
2 - Wrap
Up
I definitely agree that there are always people who will cheat. Not even the
big crime of insider trading, but from my experience, people will push the
limits as much as they can to get what they want. I've seen people leave
early from work, steal office supplies, lie about things -- these might not
seem like huge crimes, but they do hurt the company. Also I think when
people do these little things and get away with it that will lead to bigger
crimes, like insider trading and things like that that they don't think they will
get caught by doing.
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RE: Week
7Discussion Bryan Anderson
2 - Wrap
Up
12/15/2012 1:01:13 PM
I agree Colleen. Employee theft $600 million is lost to
employee fraud each year. I like your examples but you
also have to think of things that some employees dont
often think of as stealing from their employee. Some
employees print off excessive personal documents from
work printers. Over time this can be a significant cost as
the price of ink and office equipment maintenance goes
through the roof. Employees often steal “time” away from
duties including surfing the internet and talking on their
cell or texting. Employees also waste employee money
by taking smoke breaks. Smokers often take several
breaks per day more than non smokers.
http://www.enmast.com/2010/10/05/combat-employeetheft-internal-controls/
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RE: Week
7Discussion Blanche Meriweather
2 - Wrap
Up
12/15/2012 6:11:19
PM
Colleen and Bryan;
anyone that steal is a thief it doesn't matter what you
steal its wrong. Why would you steal from some one that
gives you a job. In this class we talked about the laws and
everything that dealt with it. This was like getting a law
degree, I never knew so much about the system.
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RE: Week
7Discussion Linda Sue Martin
2 - Wrap
Up
12/16/2012 2:47:06
PM
What some people view as stealing is not always the same
in everyone's eyes. As a manager of a help desk, I am
very mindful of the working conditions my people are
subjected to. They get yelled at by people who are
frustrated because their computers are not working. They
are in high stress mode with a server is down, or one of
the top managers is having a problem. Having to deal
with people who are not always nice is a very tough job.
So if my staff need to take a break and go out behind the
building and play hacky sack for a few minutes, I'm not
going to stop them. I had a manager stop me one day
and give me the once over because my staff where out
playing during work hours. I politely said I'd talk to them,
and I did. I told them what a great job they were doing.
Were they stealing time from the employer? By law
employees get break time. And as a manager I have to
make sure the environment is conducive to the well-being
of my people. Stressful jobs need some perks to keep the
people happy.
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RE: Week
7Discussion Michael Como
2 - Wrap
Up
12/16/2012 3:16:37
PM
Linda Sue, I think what you are doing is
excellent. I think there is a big difference to
employee well being and those that are taking
advantage. In any work environment, stress can
be dealt with in many ways. By giving your team
some fun time, I do not think that is stealing. I
think that an employee who surfs the internet all
day and avoids responsibilities is stealing.
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RE: Week 7
Discussion Dana Smicklas
2 - Wrap
Up
12/16/2012 9:01:41 PM
I think the addition of misappropriation theory will help to deter potential insider
trading, but it will not stop all of it. People make mistakes and say the wrong thing at
the worng time and people pick up on it and act on it. It may not always be
intentional, but it will never fully stop.
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Chelsey Houwen
12/16/2012 6:19:37 PM
I would have to yes that their conduct was illegal under the
Securities and Exchange Act. The Securities and Exchange Act of
1934 provides for the regulation and registration of securities
exchanges, brokers, dealers, and national securities associations.
Their conduct falls under the SEC Rule 10b-5, which prohibits the
commission of fraud in connection with the purchase or sale of any
security.
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