Author Question: The use of mandatory arbitration clauses in contracts between investors and their brokerage firms ... (Read 101 times)

mikaylakyoung

  • Hero Member
  • *****
  • Posts: 531
The use of mandatory arbitration clauses in contracts between investors and their brokerage firms has been prohibited by the SEC.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 2

Insider Reporting and Trading. Ronald Bleakney, an officer at Natural Microsystems Corp (NMC), a Section 12 corporation, directed NMC sales in North America, South America, and Europe. In November 1998, Bleakney sold more than 7,500 shares of NMC stock. The fol-lowing March, Bleakney resigned from the firm, and the next month, he bought more than 20,000 shares of its stock. NMC provided some guidance to employees concerning the rules of insider trading, and with regard to Bleakney's transactions, the corporation said nothing about potential liability. Richard Morales, an NMC shareholder, filed a suit against NMC and Bleakney to compel recovery, under Section 16(b) of the Securities Exchange Act of 1934, of Bleakney's profits from the purchase and sale of his shares. (When Morales died, his executor Deborah Donoghue became the plaintiff.) Bleakney argued that he should not be liable because he relied on NMC's advice. Should the court order Bleakney to disgorge his profits? Explain.



djofnc

  • Sr. Member
  • ****
  • Posts: 318
Answer to Question 1

FALSE

Answer to Question 2

Insider reporting and trading
The court ordered Bleakney to disgorge his profits. The court explained that Section 16(b) of the Securities Exchange Act of 1934 precludes corporate insiders from making short-swing profits from transactions in the corporation's stock. The statute requires disgorgement to the company of any profit derived from the matching of any purchase and any sale of a . . . security . . . within a six-month period by a statutory insider, irrespective of intent or whether overall trading during that six months (i.e., all sales and purchases combined) resulted in a loss. For the statute to apply, it is not necessary to show any actual misuse of inside information or of any unlawful intent. Rather, Section 16(b) operates mechanically, and . . . imposes liability without fault. In this case, Bleakney was an NMC officer in November of 1998, when he sold the shares at issue . . . . To the extent Bleakney's duties as an officer may have been reassigned or limited after his resignation on March 22, 1999, his actions after that date still fall within the scope of Section 16(b), for all of the sales sought to be matched with subsequent purchases indisputably occurred prior to the resignation. The sales and purchases were within six months of one another. Bleakney's defense, that NMC provided guidance to its employees concerning executive and insider stock transactions but did not caution him as to potential liability under Section 16(b), is not available under that statute.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Coca-Cola originally used coca leaves and caffeine from the African kola nut. It was advertised as a therapeutic agent and "pickerupper." Eventually, its formulation was changed, and the coca leaves were removed because of the effects of regulation on cocaine-related products.

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

Did you know?

Signs and symptoms that may signify an eye tumor include general blurred vision, bulging eye(s), double vision, a sensation of a foreign body in the eye(s), iris defects, limited ability to move the eyelid(s), limited ability to move the eye(s), pain or discomfort in or around the eyes or eyelids, red or pink eyes, white or cloud spots on the eye(s), colored spots on the eyelid(s), swelling around the eyes, swollen eyelid(s), and general vision loss.

Did you know?

The first successful kidney transplant was performed in 1954 and occurred in Boston. A kidney from an identical twin was transplanted into his dying brother's body and was not rejected because it did not appear foreign to his body.

Did you know?

Nitroglycerin is used to alleviate various heart-related conditions, and it is also the chief component of dynamite (but mixed in a solid clay base to stabilize it).

For a complete list of videos, visit our video library