Florida International University Insider Trading Business Discussion

Respond to others’ comments or questions; challenging others’ postings; and helping others understand a concept through experiences, examples, and explanations. Contribute value to the learning.

Comments such as “I agree”, “you did a great job” or “I really liked it” don’t count. Repeating what the students already said does not count. Comments must be thought out and tied back to the chapter textbook material. Your job is to add value, to add something not mentioned.

Running head: BUSINESS LAW
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Business Law
Student Name
Tutor Name
Institutional Affiliation
Course
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BUSINESS LAW
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Inside trading should not be legalized at all. The general public can believe that the markets
are unfair if just a small number of people trade with material nonpublic information. A lack of
trust in the financial system could ultimately lead to consumers’ lack of participation in some
rigged markets. Insiders with intimate knowledge can avert losses and profit (Cruces & Kawamura,
2007). That removes the risk that investors without secret information face.
Section 4(6) of the SEC’s rules exempts companies from registering with the agency if they
sell up to $5 million worth of stock to accredited investors in 12 months. Similarly, non-investment
companies can typically have unlimited offerings, but Rule 506 specifies that they cannot be
widely publicized. The Reliant Electric Company buys 57 percent of Dakota Company’s stock at
a discount to remedy this situation. As a result, Dakota Company is exempt from SEC registration
under Section 406 or Rule 506, whichever is applicable (Cruces & Kawamura, 2007).
By sharing information that was generally private to Emerson and not widely available in
the public realm, he has violated SEC Rule 10b-5 and Section 10(b) of the Securities Exchange
Act of 1934. Emerson claims that the secret information was shared with outsiders (Cruces &
Kawamura, 2007).
When Wallace accessed Dale Emerson’s information, he could be held accountable.
Insiders traded with outsiders in this case. Wallace invests in the company after learning about it
from Dale Emerson. It is possible that Wallace would have been in charge of putting the trip
together (Cruces & Kawamura, 2007).
According to the Sarbanes-Oxley Act of 2002, the CEO and CFO must certify the
credibility of financial reports. According to the SEC’s standards, the reports might be issued
(Cruces & Kawamura, 2007).
BUSINESS LAW
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Reference
Cruces, J. J., & Kawamura, E. (2007). Insider Trading and Corporate. Investor protection and
corporate governance: Firm-level evidence across Latin America, 85.