Week 5 Discussion 1 & 2 BUS 624/625 Response

BUS624 Week 5 - Discussion 2 Response

Guided Response: Respond to at least two of your peers’ posts (as well as any comments made by your instructor) in a substantive manner and provide information or concepts that they may not have considered. Each response should have a minimum of 200 words. Support your position by using information from the week’s readings. You are encouraged to post your required replies earlier in the week to promote more meaningful and interactive discourse in this discussion forum.

Below there are two of my classmate’s discussion that needs I need to response to their names are Lisa James and David Geusen

Lisa James

8:57amMar 25 at 8:57am

Manage Discussion Entry

With regard to Judith Chen, Steve Chen, Ken Hastings and Tim Daniels, which of these parties could be considered an “insider” under rule 10(b)(5) of the Securities Act of 1934? Explain why or why not.

Though she was just communicating information to her husband within the confines of her marriage, Judith Chen would be considered an insider under rule 10(b)(5) of the Securities Act of 1934. This is due to the fact that because of her position as on office of the organization, she is entrusted with information that would not go out to the public and is to be used only for corporate purposes in a confidential manner (Langvardt, Barnes, Prenkert, McCrory, & Perry, 2019). Mr. Chen would not have been able to inform his friends of what was occurring if his wife had not shared information with him.

Which of these parties could have tipper or tippee liability in this case?

In this case, Mr. Hastings would have tipper liability due to the fact that he exchanged the information for personal benefit. In this instance, he would receive 5% of any earnings gained by Mr. Daniels from the deal.

Did Judith Chen’s actions in telling her husband about the settlement breach her fiduciary duty?

According to Langvardt, Barnes, Prenkert, McCrory, & Perry (2019), a company is owed fiduciary duty when: “the corporations entrust the individual with corporate information for corporate purposes and the corporation has a business purpose for keeping the information confidential” (pg. 1265). However, in order to breach this fiduciary duty, Judith must has not only used the information for her personal gain and then disclose the confidential information and receive a personal benefit. Though the information should have been kept confidential and was not meant to be shared with Mr. Chen, Judith Chen did not breach her fiduciary duty, as she was simply sharing the information with her spouse because she was relieved.

Who actually obtained a personal benefit from the tip and how?

The beneficiaries of the tip were Mr. Daniels and Mr. Hastings. Mr. Daniels benefits because he received financial information that he normally would not have been privy to and in turn making a profit off of it. Mr. Hastings benefited not only by receiving the confidential information and making a profit but also by being able to share the information with Mr. Daniels and being able to receive 5% of his earnings.

References:

Langvardt, A. W., Barnes, A. J., Prenkert, J. D., McCrory, M. A., & Perry, J. E. (2019). Business law: The ethical, global, and e-commerce environment (17th ed.). Retrieved from https://www.vitalsource.com  

David Geusen

YesterdayMar 24 at 7:30pm

Manage Discussion Entry

With regard to Judith Chen, Steve Chen, Ken Hastings and Tim Daniels, which of these parties could be considered an “insider” under rule 10(b)(5) of the Securities Act of 1934? Explain why or why not.

Under rule 10(b)(5) of the Securities Act of 1934 Judith Chen would be considered an insider because she is entrusted with corporate information for a corporate purpose and the corporation has a proper purpose for keeping the information confidential (Langvardt, Barnes, Prenkert, McCrory, and Perry (2019). I feel that Steve, Ken, and Tim are not considered insiders because the corporation would not have intentionally entrusted them with the information Judith knew.

Which of these parties could have tipper or tippee liability in this case?

After review of each transaction I feel that Ken Hastings has tipper liability. Under the misappropriation theory, the tipper (Ken) does not need to be an insider of the organization himself to be liable. The information that Ken uncovered was non-public, and it is also clear that he is receiving a benefit for the transaction. Tim Daniels also has tipper liability because the information relayed to him by Ken is clear that it is confidential information not know to the public. On review I do not feel that Steven Chen has tipper liability because he was not benefiting from the transaction at all.

Did Judith Chen’s actions in telling her husband about the settlement breach her fiduciary duty?

When reviewing the transaction between Judith and her husband, I feel that she did not breach her fiduciary duty. Landvardt et al. (2019) explain that in insider (Judith) breaches their fiduciary duty when the insider uses the corporate information for his/her personal benefits. In the scenario Judith is relaying information to her husband on why she is in a good mood with no intent of personal gain.

Who actually obtained a personal benefit from the tip and how?

Ken Hasting obtained personal benefit from the tip because he traded in securities himself as well as recovered a finders fee by relaying the information to Tim Daniels.

References:

Langvardt, A. W., Barnes, A. J., Prenkert, J. D., McCrory, M. A., & Perry, J. E. (2019). Business law: The ethical, global, and e-commerce environment (17th ed.). Retrieved from https://www.vitalsource.com