Assignment 3: Case Studies
Address TWO of the case studies listed. Support
your responses with appropriate cases, laws, and other relevant examples.
Case Study 1
Brandon Stewart is a research analyst at Ferrell Synch, a premier Wall Street
investment company. Stewart’s area of expertise is the technology industry and
one of the companies he covers is Frugal Software Inc. Immediately after Frugal
announced their IPO in March 2013, Stewart issued a research report stating that
the company had excellent business prospects and that the IPO would be a “Strong
Buy." A few days after that Stewart exchanged a series of emails with his
buddies at Ferrell Synch. In one of the emails, Stewart wrote that "Frugal’s
shares should be used to line the bottom of bird cages." Penny Hess, a retired
postal worker invested her retirement funds in Frugal after reading Stewart's
report. The trading price when Penny purchased her stocks was $242.75 per share.
It is currently trading at $30.25. Penny wants to sue Ferrell Synch. Will she
succeed? Advance arguments to support your conclusions.
Case Study 2
Claudette Norman worked as a paralegal in the law offices of Morgan &
Morgan, a firm specializing in securities law. One afternoon while Claudette was
proofreading a document relating the merger of two Internet service providers,
the senior Morgan joked “If I weren’t such an ethical lawyer, I could buy up
some of their stock and make a ton of money. The stock prices will go through
the roof when the announcement of this merger is released.” Later that day,
Claudette told her boyfriend, Peter Nesbit what her boss said about the Internet
stocks. The next day, Nesbit purchased 250 shares of the stock and sold it ten
days later when the news of the merger was made public. Nesbit made a profit of
$5,750 on the sale of the stock. Did Morgan, Norman or Nesbit violate any
securities law(s) or ethical principles?
Case Study 3
Kevin Mendoza, a former officer and employee of the Italian Bread Co., Inc.,
owned 200 shares of stock in the bread company. Mendoza quit his position at
Italian Bread to become part owner and employee of the Great American Bread Co.
Inc., which was a competitor with Italian Bread. Mendoza requested access to
Italian Bread’s corporate books to determine the value of his 200 shares of
stock. His former employer refused on the basis that Mendoza was a competitor.
Does Mendoza have a right to view the books? Why or why not?