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Insider Trading


             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. Chiarella broke the code and bought shares of the target .
             companies based on his knowledge of the takeover bid. He was eventually caught,.
             and his case clarified the terms of what has come to be known as the classical .
             theory of insider trading. However, the Supreme Court reversed his conviction .
             on the grounds that the existing insider trading law only applied to people who.
             owed a fiduciary responsibility to those involved in the transaction. This sent.
             the SEC scrambling to find a way to hold these "outsiders" equally.
             accountable. .
             As a result, the misappropriation theory evolved over the last two decades. It .
             attempted to include these "outsiders" under the broad classifications.
             of .
             insider trading. An outsider is a "person not within or affiliated with the.
             corporation whose stock is traded." Before this theory came into existence,.
             only people who worked for or had a direct legal relationship with a company .
             could be held liable. Now casual investors in possession of sensitive .
             information who were not involved with the company could be held to the same .
             standards as CEOs and directors. This theory stemmed from a 1983 case, Dirks v.
             SEC, but the existence of the misappropriation theory had not been truly .
             recognized until U.S. v. O'Hagan in 1995. The case - U.S. v. O'Hagan - involved.
             an attorney at a Minneapolis law firm. He learned that a client of his firm .
             (Grand Met) was about to launch a takeover bid for Pillsbury, even though he .
             wasn't directly involved in the deal. The lawyer then bought a very sizable .
             amount of Pillsbury stock options at a price of $39.


Essays Related to Insider Trading

1. Insider Trading

... be presumed to have access to inside information. Anyone owning more than 10 per cent of voting shares in a company is also considered an insider by the SEC. Contrary to public perception; most insider trading is perfectly legal. Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material ... permit their insiders to trade on the basis of the nonpublic information they obtain in the course of the employment is rule 10b-5, which is the SEC's principal weapon against ...

  • Word Count: 1526
  • Approx Pages: 6
  • Grade Level: Undergraduate

2. Ethics of Insider Trading

... is done predominantly for personal financial gain. Though not central to the discussion of this paper, it is important to understand that insider trading is prohibited by law by the Securities Exchange Commission in America and various provincial boards in Canada. The issue has been brought to ... light in recent years by popular media like the movie Wall Street and by the public legal processes of celebrities like Martha Stuart. Insider trading can happen with both negative and positive information. Not just talk of mergers, new acquisitions, higher than expected profits and innovative ...

  • Word Count: 1331
  • Approx Pages: 5
  • Grade Level: Undergraduate

3. Ethical Analysis of Insoder Trading

... involves both legal and illegal activities. The legal portion involves corporate insiders; i.e. directors, officers, and employees, who buy and sell stock in their own companies. More commonly " insider trading refers generally to trading in a company's stock while in possession of material, non-public information about a company that will, when released, have an impact on the company's stock price" (Reid). ... October 22, 2002 edition, entitled "Martha Stewart Is Given Notice Of Possible Charges by the SEC", investigations are running ramped in the corporate American world. To many, ins...

  • Word Count: 2211
  • Approx Pages: 9
  • Has Bibliography
  • Grade Level: Graduate

4. Insider Trading

... famous and upper class people have used their fame and power to get the major edge on the public. Martha Stewart is an example of an insider trading scandal. What happens is a person who gives the information is called a tipper and the person who receives the information is called a tippee. ... public loses money and all the tippee's make money. These actions are very concrete for most of the people involved in the scandal, but insider trading is not easily proved. There are many loopholes and hearsays that can come with this crime. It is very difficult to prove what information was ... ...

  • Word Count: 841
  • Approx Pages: 3
  • Has Bibliography
  • Grade Level: High School

5. Martha Stewart Case Analysis

... the SEC , the case would not have been as bombastic as it had been. Perhaps MSO shares may still retain most of their value. The second compromise is less obvious: Insider trading. Insider trading is defined as the buying or selling of financial instruments on the basis of privileged information that is known, or supposed to be known, only to some restricted group of ... accruing to insiders. The trade presents an unfair situation for those who are investing in the stock. Patricia H. Werhane, a professor who teaches ethics in the Darden MBA program argues that insider trading is wrong b...

  • Word Count: 1345
  • Approx Pages: 5
  • Has Bibliography
  • Grade Level: High School

6. The Wall Street Effect

... uses his assets to beat others. His character is supposedly based off the life of Ivan Boesky, the "infamous Wall Streeter " who profited on severe amounts of insider trading. The workaholic was "addicted to money and the lifestyle it provided " (Meserve). These traits are evident in Gordon Gekko's character. Without shame, "he would learn ... exclusive, inside information " (Meserve). The power, money, and lifestyle are great, but at what cost? Boesky's career was ruined when the authorities caught him trading with insider information, and although he was able to make a sweet deal in exc...

  • Word Count: 1593
  • Approx Pages: 6
  • Has Bibliography
  • Grade Level: High School

7. The Wall Street Effect

... uses his assets to beat others. His character is supposedly based off the life of Ivan Boesky, the "infamous Wall Streeter " who profited on severe amounts of insider trading. The workaholic was "addicted to money and the lifestyle it provided " (Meserve). These traits are evident in Gordon Gekko's character. Without shame, "he would learn ... exclusive, inside information " (Meserve). The power, money, and lifestyle are great, but at what cost? Boesky's career was ruined when the authorities caught him trading with insider information, and although he was able to make a sweet deal in exc...

  • Word Count: 1593
  • Approx Pages: 6
  • Has Bibliography
  • Grade Level: High School

8. Sarbanes-Oxley Act

... Sarbanes-Oxley) Securities fraud has been increased to 25 years, and finally some smaller provisions have banned personal loans to executives, and prohibit insider trading during blackout periods.(AICPA,Sarbanes-Oxley) Previously to the new laws, insider trading could be performed without report of the transaction. If an executive transferred stock to a Cayman Island entity that then sold it, the company ... , corporate codes of ethics; • Prohibits issuers from extending new personal loans to directors and executive officers; • Accelerate the reporting of insider trades within two bus...

  • Word Count: 1972
  • Approx Pages: 8
  • Grade Level: Undergraduate

9. schizophrenia

... laws broadly prohibit fraudulent activities in connection with the offer, purchase, or sale of securities. These provisions are the grounds for many different types of disciplinary actions including fraudulent insider trading. Insider trading is illegal when a person trades a security while in possession of nonpublic information. The Trust Indenture Act of 1939 applies to debt securities such as bonds, debentures, and ... issuer of bonds and the bondholder. The Investment Company Act of 1940 regulates the organization of companies, including mutual funds, that deal mostly with investing, ...

  • Word Count: 773
  • Approx Pages: 3
  • Grade Level: Undergraduate

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