Violation of Sec Rule 10-B-5 of the Federal Statue Essay

1470 Words 6 Pages
Memorandum

To: Reader
From: Date: July 11, 2014
Re: Violation of SEC Rule 10-b-5 of the Federal statue

Summary
Aquaman is president of a marine research company called "Underwater Leagues, Inc." On April 1, the research director of Underwater Leagues tells Aquaman that they've come up with "Oxygum," a means of breathing underwater by chewing a special kind of gum. Aquaman knows a great product when he hears it.
He delays announcing the invention to the public so that he can buy all the stock he can get his hands on. He buys 50,000 shares of Underwater Leagues, at $10 a share. After the announcement, the share price skyrockets to $50 per share.
a) If the shareholders bring a derivative action against Aquaman, what federal
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Antar, 15 F. Supp. 2d 477 (D.N.J. 1998), the court dealt with whether corporate insiders traded in the securities of its corporation on the basis of material and nonpublic information. In Antar and in our case, the information was material in that it is substantially likely that a reasonable investor would have considered the facts important in making an investment decision. Material facts include not only information disclosing the earnings and distributions of a company, but also the facts which affect the probable future of the company and those which may affect the desire of investors to buy, sell, or hold the company's securities.
The court in Antar stated “that shareholders of a corporation and those insiders who obtain confidential information by reason of their position with the corporation should have a relationship of trust and confidence and that trading on such information qualifies as a "deceptive device" under § 10(b).” Aquaman is in violation of 17 CFR § 240.10b-5, “Employment of Manipulative and Deceptive Practices,” by scheming, omitting to state a material fact, and committed fraud in connection with the purchase and sale of stocks in his company.

Analysis
In Antar, and in our case, shareholders of a corporation and those insiders who obtain confidential

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