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Scandals. ... Scenarios like this become reality on a regular basis. One of the most
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Polititical scandals. When it comes to the importance of checking state and local
politicians, I think it is extremely important to a certain extent. ...
Submitted by banker on May 10, 2005
Category: Business
Words: 2097 | Pages: 9
Views: 272
Popularity Rank: 42,874
Average Member Grade: N/A (Add a Comment / Grade this Paper)
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...
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