Jim Brock was an accountant with Hubbard Inc., a large corporation with stock that was publicly traded on the NYSE. One of Jim's duties was to manage the corporate reporting department, which was responsible for developing and issuing Hubbard's annual report. At the end of 2012, Hubbard closed its accounting records and initial calc. indicated a very profitable year. In fact, the net income exceeded the amount that have been projected during the year by the financial analysis who followed Hubbard's stock.
Jim was pleased with the companys financial performance. In January 2013, he suggested that his father buy Hubbards stock because he was sure the stock price would increase when the company announced its 2012 results. Jims father followed that advice and bought a block of stock at $25 per share.
Was anyone harmed by Brock's actions? Does it matter if Brock himself profited or if some other party purchased stock based on his knowledge? Do brokers and analysts receive information about the firm that is not available to the public? Doesn't everyone engage in insider information? If Brock decides he did act unethically, what action should he take to correct the situation? What company policies or procedures could be adopted to ensure that similar situations do not arise in the future?
Was anyone harmed by Brock's actions?
-- The current and potential investors were harmed by his actions. He created an unfair market in regards to the company's stock. He is also guilty of insider trading and the SEC could file criminal charges against him. Jim encouraged his father buy the stock, and based on the case's circumstances, we could reasonably assume that this information is the only reason the father bought the stock. Every stock transaction influences the market. In this case, the market was influenced from the purchase, which was based on insider trading.
Does it matter if Brock himself profited or if some other party purchased stock based on his ...
This solution provides a thorough discussion to the scenario presented, based on Jim Brock. Brock's actions are analyzed, and the appropriate accounting, ethical, and legal elements are discussed.