How Does Knowledge Flow Affect The Financial World And How Is It Distributed?

knowledge of said investors because of his employment at Schwab. If they can do so, it is

When assessing the economic damage to due to Paul Thayer and those that he tipped off about the acquisition of Campbell Taggart, it should be noted that some argue that this kind of insider trading circulates information and forces the stock to its “true value.” If we assume this argument to be flawed, then part of Anheuser-Busch stock dip after the announcement was due to the insider trading and the fact Anheuser-Busch probably paid more to acquire its target. Thayer and his friends trade the Campbell stock for nearly a month before any public announcement of the merger. On July 27 nearly half the volume was insider volume controlled by those individuals who were in violation of rule 14(e)-3 (See exhibit 2). The increased volume might

Overview of the Case: The Securities and Exchange Commission claims Mark D. Begelman misused proprietary information regarding the merger of Bluegreen Corporation with BFC Financial Corporation. Mr. Begelman allegedly learned of the acquisition through a network of professional connections known as the World Presidents’ Organization (Maglich). Members of this organization freely share non-public business information with other members in confidence; however, Mr. Begelman allegedly did not abide by the organization’s mandate of secrecy and leveraged private information into a lucrative security transaction. As stated in the summary of the case by the SEC, “Mark D. Begelman, a member of the World Presidents’ Organization (“WPO”), abused

Companies have varied motives for creating fake news. Satirical news sites such as The Onion are often meant to serve as humorous jabs at the current news cycle while one-sided sources seek to persuade the reader of a philosophical idea or political agenda by excluding facts and cherry picking data. Deliberately deceitful news sources are often meant to influence readers to buy into a product, mindset, or even to gain “hits” for a website by telling an outlandish story, allowing that site to receive advertising money after a story reaches a certain amount

Even though the information about PIPEs was material inside information, Mark Cuban was not accused as traditional insider information. To qualify as traditional insider trading, there must involve true insiders buying or selling the company’s stock based on material inside information.

And while anecdotal here, Kerry Heitz, a professional colleague preparing to exit after many years had been the epicenter of the leak and the unfolding firestorm in this tale of woe. It turns out that during a casual conversation with Christine over coffee, Kerry decided to seize the moment in this parallel universe. Being one of those trusted fiduciaries, he saw a pattern of significant abuses and took the unprecedented opportunity to propose linking executive bonuses to financial performance. Whether it was naivety or just trying to do right by the company, he should have realized that Christine had been kept uninformed by design. In any event, it didn’t take long before Kerry realized the error of his ways as the topic of that conversation eventually made its way back to Bill where it was not favorably received

Both parties consulted their attorneys whose guidance instructed them that they did not have to disclose the information. The motivating factor in both decisions was to protect the livelihood of their companies. The facts of the information that had been revealed to each company had not been proven.

““The name of the game, moving money from your clients pocket to your pocket”, Mark stated. “But if you can make your clients money at the same time it’s advantageous to everyone, correct?” “No, Mark replied…Okay, first rule of Wall Street-nobody and I don’t care if you are Warren Buffet or Jimmy Buffet- knows if a stock is going up, down or sideways, least of all stock brokers. But we have to pretend we know.”” (8)

Insider trading is essentially the trading of confidential information that is basically sold to the highest bidder. David Hilzenrath, a journalist, describes, “Given the scope of the allegations to date, we are not talking simply about the occasional corrupt individual, we’re talking about something verging on a corrupt business model…” (Hilzenrath). Hilzenrath is suggesting that Wall Street as a whole is being deceitful and doing more than they are letting the public know. Insider trading is not a victimless crime, it takes advantage of honest investors. It is easy to stereotype the rich as greedy due to how they attain their wealth through power but the middle class can be just as greedy by trying to live vicariously behind a mountain of

This case didn’t gain as much publicity as did the OJ Simpson case. In this there was a lot of evidence that linked Martha Stewart to the crime of insider trading. The Martha Stewart case in my opinion was a pretty straightforward case with the exception of the use of an expert witness that was used in the case. Expert witnesses are presented to the court to give their best professional opinion of the questions that they’re being asked. In the Martha Stewart case, expert witness, Larry Stewart was charged with lying several times on the stage. Larry Stewart was accused of elaborating his role of analyzing documents used as evidence at the trial and also lying about his knowledge of a technical book others were writing. The use of an expert witness and their qualifications was brought into question in this case as it has in many of cases in the past. Larry Stewart’s testimony was excused from the courtroom proceeding and he was ultimately charged with perjury. (SEC charges Martha Stewart,

Looking at the case 41.9 there was a violation in sections 32 of the Securities Exchange Act of 1934. This violation was done by R. Foster Winans in which he committed some insider trading where he agree to provide Felis and Brand with information that was to appear in the “head” which is a widely read and influential column. This information was to be provided by Winans to the brokers the day before it appeared in the Journal. Now taking that into account this is a serious violation of insider trading which is the illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential. The classical theory of insider trading is the theory I believe should be used for the prosecution of this case.

For example, Manna (1966) states that insider trading should be allowed because insider trading is the most effective way to compensate to insider to generate new economic information in firm. Hirshleifer() states that for insider, good information is as good as bad information to make profit but this profit may not be related to economic contribution of insiders in corporate. Proponents of insider trading suggest (Carlton and Fischel (1983) that insiders are the most informative member in the market, and by trading, they bring new information to the markets and causing prices to change toward their true value and, therefore, promoting the optimal allocation of resources. On the other hand, Scholars (Benabou and Laroqu, 1992) say that insider trading may provide incentive to corporate insiders either to delay the announcement of price-sensitive information to public or to prevent to release price sensitive information, which in turn makes stock prices less informative. However, Georgakopoulos (1993) argues that restriction on insider trading may have little adverse impact on market efficiency but it reduces the cost of transaction that burdens on uninformed traders

Corporate directors and officers often obtain advance inside information because of their positions. Sometimes the information can affect the future market value of the corporate stock. It is obvious that their positions can give them a trading advantage over the general public and shareholders. Often times the insider is the company manager; other times it is the company's lawyer, investment banker, or even the printer of the company's financial statement. Anyone who has knowledge before public dissemination of that information stands to benefit from good news or bad news.

Financial innovation is constantly reshaping the world. However, the subprime crisis since 2008 has drawn great attention all over the world, highlighting the limitations and hazards of financial innovation. The financial turmoil began in the United States, at which time, the subprime mortgage lenders were going bankrupt, investment funds were forced to close and the value of the stock declined significantly. According to Sánchez, the Deputy Governor of Mexican Central Bank, the subprime crisis since 2008 was mainly caused by the phenomenon that the innovation of many complex financial instruments were extensively used without appropriate regulation (Sánchez, 2010). As financial innovation involves a large number of products and cannot analyze all of them, this essay will only focus on MBS, which has been one of the most important and widely-used financial innovation since the 1960s. By the end of 2006, the total amount of MBS was $6.4 trillion, 49% larger than the market for Treasury debt (Fabozzi, Bhattacharya and Berliner, 2010).

Generally, the original unauthorized disclosure (leak of confidential board deliberations) incorporated the chain of various events that caused the company to face the court a hearing that took place twenty months earlier before Patricia Dunn became the Chairman. The entire board made an agreement of asking the company outside counsel and make sure that they conducted investigations due to possible leaks. According to reports, there were possibilities that, few board members were leaking confidential conversation of the board.