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Training session to identify shareholder crimes: agency to prosecute, punishment

You are the new training manager for a large corporation that offers employees the opportunity to purchase company stock directly through their paychecks. Using the following scenario and other recent real-life examples, develop a training session for the employees of the company. The goal of the training session presentation is to accomplish the following:

Identify the crime.
Explain what federal agency would prosecute the crime.
What punishment(s) could be enforced?
Provide other real-life examples of people who have committed this crime.


Jack and Diane are married and both executives at Electro-Source, a large multinational electronics company. The couple holds substantial Electro-Source company stock and the majority of their retirement funds depend on company stock performance.

Jack is a director within the marketing division, and Diane is a vice president in charge of all North American sales. One Friday, Jack advises Diane that the company lost a large government contract for new electronic components. The contract was worth over US$1 billion in sales and the loss could signal large layoffs. Government officials have not publicly announced their contract decision; however, they have advised, privately and confidentially, several nonwinning bidders, including executives at Electro-Source.

Jack and Diane decide to immediately sell the majority of their company stock to protect their retirement savings. The market on that Friday was favorable toward Electro-Source stock as earlier reports indicated that Electro-Sources was a finalist for the contract; however, as stated, a final decision was not public yet. Jack and Diane sell their stock to unsuspecting investors through their personal broker.

Approx 8 slides with speaker notes

Solution Preview

Here's how I'll approach this for you: 1) I'll talk briefly about each of the 4 issues involved, 2) I'll see what real life examples and resources I can come up with from online, and 3) since we're not allowed to do students' work for them, I can't make the slides, but I am allowed to provide you with a viable outline, so I will do that. If you have technical questions about how to make the slides, let me know and I'll see if I can answer them. That part should be fairly simple.

Identify the crime.

Well, for starters, this was definitely insider-trading. Insider trading is the trading of a company's stocks or bonds by individuals with access to non-public information. It's important to note that corporate officers, or other "insiders" may still be allowed to trade in the company's stock. In fact, most stock quote services have a tab that lists the last insider trades by who, when, what amount, and what price. There are certain rules governing this practice. For example, legal insider trading cannot be done based off non-public information. What Jack and Diane did, however, was clearly done with the intention to profit (or stem loss) from non-public information, and is illegal.
Further Reading: http://www.sec.gov/answers/insider.htm

Explain what federal agency would prosecute the crime. ...

Solution Summary

The solution contains in-depth answers to the questions posed by the student.