Unit 9 Assignment

Unit 9 Assignment

Cassey Melendez

Kaplan University

LS311: Business Law I

September 3, 2012

Registration statements must be filed by all companies, domestic and foreign with the Securities Exchange Commission. This registration information includes: a full description of what a company owns as far as property and business, information on the securities for sale, management of the company and certified financial statements, i.e., prospectus. There are exemptions for registration: Private offerings of persons or institutions, those of a limited size, multi state offerings, and government securities (U.S. Securities and Exchange Commission, 2011).

A 10b-5 violation based upon "tipping" occurs where a corporate "insider" provides material nonpublic information to an "outsider" and realizes a benefit (including a reputation benefit from a relative, friend or acquaintance). Here, Emerson gave his uncle Wallace inside information about a takeover of Dakota by Reliant,and Wallace profited from that information. Emerson clearly received a reputation benefit, therefore he is liable for a violation of Rule 10b-5 (Miller & Jentz, 2008).

Wallace, as an outsider, may be liable for insider trading under a "breach of personal relationship theory" (10b5-2), if there is a personal history of confidence between Wallace and Emerson concerning sharing of information. Wallace may also be liable under the 1988 Insider Trading and Securities Fraud Enforcement Act, because he purchased securities on a national exchange, based on inside information, and thus gained an unfair advantage over the seller of those securities.

Title 18 U.S.C. 1350(a) (n.b., this is a criminal statute) requires that "Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m (a) or 78o (d)) shall be accompanied by a written statement by the chief executive...