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BUS 607 Week 2 Assignment Violations of Securities Laws
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Running head: SECURITY 1 Violation of Security Laws Kathleen Brown Business Law Commercial Law for Accountants Instructor: Richard Barrett March 28, 2016 This study source was downloaded by 1000... 00831988016 from CourseHero.com on 04-29-2022 13:38:14 GMT -05:00 https://www.coursehero.com/file/14512972/Violation-of-Security-Laws/ SECURITY 2 Violation of Security Laws Karel Svoboda is a credit officer for Rogue Banks, evaluating and approving clients’ extensions on lines of credits through his employer. These responsibilities gave Svoboda access to nonpublic information about these clients’ earnings, performance, acquisitions, and business plans from confidential memo’s, emails, and other sources. Svoboda devised a scheme with Alena Robles, an independent accountant, to use the information of those clients to trade securities. In accordance to their scheme, Robles traded in securities in more than twenty different countries and profiting two million dollars. Svoboda, also executed trades of more than eight hundred thousand dollars despite the agreement that Robles would make all trading transactions. Aware that this scheme violated the Rogue Bank policy, Svoboda and Robles attempted to conduct their trades to avoid suspicion. When Rogue Bank asked Svoboda about the transactions, he lied and refused to cooperate, therefore resulting in his termination from his employer. Insider trading, although commonly used in the illegal context, can also be legal. This happens when a corporation sells or trades its own securities with their own companies. Unfortunately, within the above scenario, the insider trading in action would be the illegal kind. Under the circumstances, Karel Svoboda and Alena Robles are in violation of the Securities Act of 1934. According to the Securities Exchange Commission, Karel Svoboda, is in violation of Securities Exchange Act of 1934 Rule 10b5 which “prohibits the commission of fraud in connection with the purchase or sale of any security...insider trading, which occurs when persons buy or sell securities on the basis of information that is not available to the public.” [Rog14]. Alena Robles is also in violation of Rule 10b5 under the misappropriation theory: “This theory This study source was downloaded by 100000831988016 from CourseHero.com on 04-29-2022 13:38:14 GMT -05:00 https://www.coursehero.com/file/14512972/Violation-of-Security-Laws/ SECURITY 3 holds liable an individual who wrongfully obtains inside information and trades on it for his or her personal gain.” [Rog14] In order to completely understand this case, the meaning behind why nonpublic information is important must be clearly explained. Section 5 of the Securities Act of 1933 states that a security must be registered before it [Show More]
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