Reply to discussion- 1 (250 words)

Discussion 1:

1. Dakota Gasworks Inc. does not require registration with the SEC. SEC registration with the Security and Exchange Commission (SEC) under Section 4(6) notes that there is a registration exemption if an organization’s stocks of approximately $5 million are sold to a given accredited investor under a 12 months period. “Investor Protection, Insider Trading, and Corporate Governance” (845) supports this by noting that this exemption is under Regulation D, Rule 506, denoting that a non-investment company offering of up to $5 million within any 12 months is under exempt transactions. Aside from that, SEC (para.1) notes that Rule 506 mandates an exemption of registration for private non-investment companies that have unlimited or unadvertised offerings. Thereby, since Reliant Electric Co. purchased a majority share of Dale Gasworks, the company is free from SEC registration under these mandates. 

2. Since Dale Emerson shared information on the company, he violated Section 10(b) under the 1934 Securities Exchange Act and the SEC Rule 10b-5. The information in which Dale Emerson shared was not yet made public. As such, he should have maintained confidentiality. The American Bar Association (para.2) notes that Section 10(b) reveals that it is unlawful to use deceptive or manipulative devices that influence security. 

3. Wallace may be held liable or otherwise responsible for insider trading since he retrieved information from Dale Emerson, thereby denoting insider trading by outsiders. Besides that, Wallace may also be found liable for insider trading since he purchased stock after retrieving information from Dale Emerson. Therefore, it is evident that he sought to gain from the information received. 

4. The 2002 Sarbanes-Oxley Act notes that the certification of accurate financial statements is done by the CFO and the CEO of a given company. These financial statements must be certified regularly on a monthly, annual, quarterly, and semi-annual basis per the Security and Exchange Commission requirement. 

Debate This: Insider trading should be legalized

Insider trading denotes the sale or purchase of securities by individuals with information that has not been publicized. Although insider trading has been deemed unethical and illegal, some critics assess that it should be legalized since it facilitates the provision of useful information to markets. Its legalization can help in preventing harm to innocent individuals and causes minimal harm. Nevertheless, the main argument against this practice is that it promotes unfairness while discouraging ordinary individuals from participating in various markets. In turn, this makes it hard for organizations to raise capital. Thereby, while arguments supporting the legalization of insider trading are sound, those against it also prove ethically sound.

 

Works Cited

“Investor Protection, Insider Trading, and Corporate Governance.” pp. 841-849.

American Bar Association. “Section 10(b) Litigation: The Current Landscape”. ABA, October 20, 2014. Accessed on May 30, 2021, from www.americanbar.org/groups/business_law/publications/blt/2014/10/03_kasner

SEC. “Private placements - Rule 506(b)”. Accessed on May 30, 2021, from  www.sec.gov/smallbusiness/exemptofferings/rule506b