Mike, as corporate counsel and corporate secretary of Pandora Personal Products, has learned that insider information about his company's planned acquisition of a smaller manufacturer, Just Tweezers, Inc., has been leaked to outsiders. The leak has been traced to his son, who Mike had told about the merger in confidence. The next day (and weeks before the merger news becomes public), the price of Pandora stock rises from $15/share to $21/share and closes the day at $20.25. The official word from the company that day?and Mike drafted the "no news" news release at the request of the stock exchange?is that there is no news forthcoming and no explanation for the stock price rise.
? Do you suppose Mike and may be some trouble or are things OK for now?
? Anybody else maybe sweating bullets at the moment?
? Explain what law violations are evident now or might become evident as the days go by.
? Finally, what strategy should Mike's company employ now, keeping in mind the laws about insider trading that you've learned about.
Is Mike in Trouble?
Insider trading generally refers to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence while possession of material, non-public information about the security (U.S. Securities and Exchange Commission, 2008). In this case, Mike has not done any trading or leaked any information; however, Mike may still have some issues with the SEC to deal with. Since Mike is aware that the non-public information has been released prior to the acquisition, the stocks are rising and he has also made an official statement that there is no plans to expand, he could be in violation of SEC Section 205.3(b). This section states that an attorney's duty is to protect the interest of the issuer the attorney represents by reporting to the issuer the evidence of any violation by an officer, director, employee, or agent of the issuer.
The Act requires that information regarding securities be provided to investors so that they may make informed decisions; however, in this case the merger has not gone through.
Mike could also be in violation of the Regulation Fair ...
This solution discusses a scenario in which Mike, as a corporate counselor and secretary for Pandora Personal Products ahs leaked insider information in regards to an upcoming merger. The solution discusses the implications of Mike's actions, the others involved and their role in the leak. It also discusses what, if any, trouble Mike is in. The solution is approximately 700 words and has three citations.