Training Presentation on Shareholder crimes

In this PPT you will get the answer of the following assignments:

You are the new training manager for a large corporation that offers employees the opportunity to purchase company stock directly through their paychecks. Using the following scenario and other recent real-life examples, develop a training session for the employees of the company. The goal of the training session is to accomplish the following: 

Shareholder crimes

Identify the crime.

Explain what federal agency would prosecute the crime.

What punishment(s) could be enforced?

Provide other real-life examples of people who have committed this crime.

SCENARIOJack and Diane are married and both executives

at Electro-Source, a large multinational electronics company. The couple holds substantial Electro-Source company stock and the majority of their retirement funds depend on company stock performance.

Jack is a director within the marketing division and Diane is a vice president in charge of all North American sales. One Friday, Jack advises Diane that the company lost a large government contract for new electronic components.

The contract was worth over US $1 billion in sales and the loss could signal large layoffs. Government officials have not publicly announced their contract decision; however, they have advised (privately and confidentially) several non-winning bidders, including executives at Electro-Source.

Jack and Diane decide to immediately sell the majority of their company stock to protect their retirement savings.

. The market on that Friday was favorable toward Electro-Source stock as earlier reports indicated that Electro-Sources was a finalist for the contract; however, as stated, a final decision was not yet public.

Jack and Diane sell their stock to unsuspecting investors through their personal broker

Running Head: INSIDER TRADING

Training on Insider Trading

Insider Trading 1

Introduction

Case Overview

Crime: Insider Trading

Federal Agency: Security and Exchange Commission

Insider Trading 1

Insider Trading

What is Insider Trading

Impact of insider trading

Insider Trading 1

Identify the Crime

Involvement of Internal Person of Organization

Internal Information

Information use for self- interest

Insider Trading 3

(U.S. Securities and Exchange Commission, 2010)

US Regulation of Insider Trading

Section 16 of the 1934 Securities Exchange Act

Section Rule 10b-5

Section Rule 14-e3

Section 16 of the Securities Exchange Act 1934

Section 16 (a) : Disclosure Provision

Section 16 (b) : Recovery of Short Swing Profits

Section Rule 10b-5

Aspect of the Rule

Elements of the offense

Protective aspect from insider trading

Section Rule 14e-3Prohibits the insider trading during the tender

offers

Establishes a “ disclose or abstain from trading”

Is not premised on breach of a fiduciary duty

Section Rule 14e-3(a)

Section Rule 14e-3(d)

Punishment for the Insider Trading The punishment for the insider trading are:

Penalties

Imprisonment

Example of The Insider Trading Martha Stewart’s Insider Trading Case (Haffmen

& Drew, 2007)

Perot Systems Insider Trading Case (U.S. Securities and Exchange Commission, 2010).

Two French Citizens Insider Trading Case (U.S. Securities and Exchange Commission, 2010).

References Kennon, J. (2010). Understanding Insider

Trading. Retrieved March 2, 2010. From http://beginnersinvest.about.com/cs/newinvestors/a/102702a.htm

Bartos, J.M, (2006).United States securities law: a practical guide (3rd ed.). Kluwer Law International.

Jhonson, P.M. & Hazen, T.H. (2004). Derivatives regulation. Aspen Publishers Online.

  Steinberg, M.I, (1984). Securities regulation: liabilities and remedies. Law Journal Press.

ReferencesHaffmen & Drew. (2007). Martha Stewart's

Insider Trading Case: A Practical Application of Rule 2.1. Retrieved March 2, 2010. From http://www.allbusiness.com/legal/banking-law-banking-finance-regulation/8908385-1.html

U.S. Securities and Exchange Commission, (2010). Retrieved March 2, 2010. From http://www.sec.gov/news/press/2009/2009-275.htm

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