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Rogue Bank

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Violations of Securities Laws

Karel Svoboda, a credit officer for Rogue Bank, evaluated and approved his employer's extensions of credit to clients. These responsibilities gave Svoboda access to nonpublic information about the clients' earnings, performance, acquisitions, and business plans from confidential memos, email, and other sources. Svoboda devised a scheme with Alena Robles, an independent accountant, to use this information to trade securities. Pursuant to their scheme, Robles traded in the securities of more than twenty different companies and profited by more than $2 million. Svoboda also executed trades for his own profit of more than $800,000, despite their agreement that Robles would do all the trading. Aware that their scheme violated Rogue Bank's policy, they attempted to conduct their trades to avoid suspicion. When the bank questioned Svoboda about his actions, he lied, refused to cooperate, and was fired. Using this information, address the following:

Explain what crimes Svoboda and Robles each committed.
Analyze the civil liability for Svoboda and Robles including who could file suit and on what grounds.
Explain any defenses that Svoboda and Robles could raise and the likely success of the defense.

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Solution Summary

The answer to this problem explains violations of securities laws by Svoboda and Robles at Rogue Bank . The references related to the answer are also included.

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1. The crime committed by Svoboda and Robles is insider trading. Insider trading is illegal when information is nonpublic and trading while having special knowledge. Such trading is unfair to other investors who do not have access to such knowledge. Svoboda is a credit officer for Rogue Bank and has used nonpublic information about client's earnings, performance, acquisitions, and business plans to make trades. Similarly, Robles used information from Svoboda to make trades in securities and profited by more than $2 million. Svoboda was the tipper and Robles was the tippee. It has been ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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