Securities Essay

854 words - 4 pages

Facts of the Case:
Aquaman, the president of a research company, delays the announcement of a great new product that the research company has invented so he can buy up all of the company's stocks that he can get his hands on and sure enough after the announcement, shares soar from $10 to $50 a share.
Issue:
What law if any did Aquaman violate and what remedy should the shareholders seek?
Rule of Law:
Securities and Exchange Act of 1934 17 C.F.R. § 240.10b-5 Employment of manipulative and deceptive devices. It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national ...view middle of the document...

The court did rule in favor of the plaintiff's in this matter.
SEC v. Ferrero, 1992 U.S. Dist. LEXIS 13575 (D. Ind. 1992) dealt with unlawful insider trading that occurred after a corporate director tipped inside information about the negotiation of an acquisition. The court stated that a violation of § 10(b), Rule 10b-5, and/or § 17(a) can be found if trading in securities is based on nonpublic, material information without first disclosing the nonpublic, material information. "Information is material if there is a 'substantial likelihood' that the information would be significant to a 'reasonable investor' in making his or her investment decisions." One of the remedies was to disgorge the profits derived from their activities and additionally a prejudgment interest on the amount to be surrendered was ordered. The court found that paying the profits and a prejudgment interest on the amount disgorged was necessary in order to prevent any unjust enrichment as a result of unlawful acts by the defendant's.
In re Cardinal Health, Inc. Sec. Litigs., 426 F. Supp. 2d 688, 748 (D. Ohio 2006) dealt with insider trading an elaborate accounting scheme designed to artificially inflate the corporate earnings and conceal debt. The court stated “insider trading at a suspicious time or in an unusual amount comprises one of the 'fixed constellations of facts that courts have found probative of securities fraud." An inference of fraudulent intent to mislead the market for personal gain is noted...

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