Book: Business Its legal, ethical, and global environment, 10th edition Please c
ID: 449797 • Letter: B
Question
Book: Business Its legal, ethical, and global environment, 10th edition
Please complete and discuss your choices on the insider trading “test” found in theFor the Manager’s Desk section of the textbook (page 652).
Example response format (the examples are not necessarily correct or my opinion):
1. No, I don’t think I violated 10b because….
Thus, it is an ethical action.
2. Maybe, Dirks and his clients did violate 10b because……
But I think it is an ethical action.
3. Yes, Mr. Cuban engaged in insider trading because…..
I think it is unethical because…
Explanation / Answer
1 - No, I don’t think I violated 10b because insider trading, you must be an insider to the company whose stock you are buying/selling. Thus, it is an ethical action.
2- Maybe, Dirks and his clients did violate 10b because Did Dirks violate 10b-5 in disclosing the inside information to his clients. But I think it is an ethical action.
3- Yes, Mr. Cuban engaged in insider trading because 3Dirks was a broker, not associated with any company. He gets a tip from Secrets. Secrets worked for an insurance company who was engaged in fraud, Secrets told Dirks about this in an effort to expose the fraud. Dirks go public with the info and are ignored, Dirks tells his clients and they sell their stock. The price of the company falls and everything is eventually exposed. Then SEC charges Dirks with violation of 10b-5 insider trading.
Dirks aren’t liable for violation of 10b-5.In this case Secrets disclosed to reveal fraud, which isn't a breach of fiduciary duty.
I think it is unethical because
Examples of insider trading cases that have been brought by the SEC/SEBI are cases against: a) corporate officers, directors, and employees who traded after learning of significant, confidential corporate developments. b) Friends, business associates, family members, and other “tippers” of such officers, directors, and employees, who traded the securities after receiving such information. c) Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded. D) Government employees who learned of such information because of their employment by the government.