Securities and Stocks - 75363

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  • From: Business, Algebra
  • Posted on: Sat 27 Sep, 2014
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Case Solution :

1.      As regards case a/c Norman and Norman, all the three named that is, Morgan, Norman and Nesbitt  violated both ethical principles and also the law of the land, the Insider Trading Act of  1934. As the public invests their money in equities in the stock market, any news which an insider knows about a development in the near future, gives the person an unfair advantage and becomes an act of anti-trust. Under rule 10 5-b of the act, it is unlawful for an insider to violate his duty of confidentiality to the stakeholders of the organization which he may represent and through which he may have access to information not available to other people. Even revealing the matter is a criminal act, let alone trading from the knowledge and amassing wealth

 Rajat Gupta , the former CEO of McKinsey was found guilty of revealing confidential information to an alleged friend. While the friend made good financial use of the information, Gupta never traded in the particular securities. He was however found guilty by a Federal Manhattan court and will have to go to prison, despite the fact that he made no profit from his breach of confidentiality { Pavlo,2012}. In the case we are concerned with, Nesbitt profited from the knowledge but Morgan and Norman are guilty of breach of confidentiality, despite not profiting from the act.




Pavlo, W (6/15/2012). Former McKinsey and Co. Boss, Rajat Gupta, Guilty of Insider      Trading, Forbes magazine .Accessed on 28th September  2014       boss-rajat-gupta-guilty-of-insider-trading/>


2.      In the case of Mendoza

In this case, if Mendoza owns  shares of equity of Italian bread Co. Inc. since he is a shareholder. Every shareholder has a right to see the company’s Annual Report where they are required to give financial and other information so that a common investor can decide whether to invest in the company or not. Italian bread cannot refuse to show him. But instead of going to all that bother, Mendoza can check up himself, as these information are kept in the public domain.