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  1. #1
    Registered User icewill36's Avatar
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    Business Law problem, HELP (reps)

    Dale Emerson served as the chief financial officer (CFO) for Reliant Electric Co., a distributor of electricity serving portions of Montana and North Dakota. Reliant was in the final stages of planning a takeover of Dakota Gasworks, Inc., a natural gas distributor that operated solely within North Dakota. Emerson went on a weekend fishing trip with his uncle, Ernest Wallace. Emerson mentioned to Wallace that he had been putting in a lot of extra hours at the office planning a takeover of Dakota Gasworks. On returning from the fishing trip, Wallace met with a broker from Chambers Investments and purchased $20,000 of Reliant stock. Three weeks later, Reliant made a tender offer to Dakota Gasworks stockholders and purchased 57 percent of Dakota Gasworks stock. Over the next two weeks, the price of Reliant stock rose 72 percent before leveling out. Wallace then sold his Reliant stock for a gross profit of $14,400.

    I just need to know if emerson violated any laws. Is just discussing things someone else insider trading if you aren't telling them so they can take advantage ? (but they do anyway without your knowledge)
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  2. #2
    Registered User icewill36's Avatar
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    ^^^^^^^^^^^
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  3. #3
    Registered User Looter's Avatar
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    I believe it is since his uncle is an insider
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  4. #4
    Registered User ralphplsgo12's Avatar
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    it is still insider trading whether the discussion was used for stock purposes or not. wallace could get in trouble

    EDIT:also im 90% sure the ceo could get in trouble too because he is strictly liable for the information he shares to outsiders as CFO
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  5. #5
    Barbarian Hoard[er] proconsul's Avatar
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    Yes, it is a 10b-5 violation by Emerson under the misappropriation interpretation. The current Rajaratnam/Galleon case is a clear analogue to the situation you outlined.
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  6. #6
    (っ◕‿◕)っ rallyum's Avatar
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    yes, negligence.

    in australia its known as duty of care, breach = negligence. test used to determine it is reasonable person test, i.e. would another CFO fall for the same thing

    uncle goes away too for insider trading, unfair advantage etc.


    both are punishable under criminal and tort. maybe contract depending on things.
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  7. #7
    Registered User icewill36's Avatar
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    thanks brahs.... used my reps for today on you guys, though they are measly
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  8. #8
    Getting my Durantula on FryDude's Avatar
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    Originally Posted by icewill36 View Post
    thanks brahs.... used my reps for today on you guys, though they are measly
    i repped them 4 u..
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