Question

1. Assume these facts as true: Sen. Burr chaired the Senate Intelligence Committee. At a closed confidential hearing in late January, he heard dramatic evidence that the corona virus was likely to heavily impact the United States and its economy (which is what happened). The following day, Sen. Burr called his stockbroker and told him to sell all of his $2 million worth of stock holdings. Two weeks later, the danger of the corona virus became known to the public, and the stock market lost much value. Sen Burr saved $400,000. By selling his stock when he did. Was Sen Burr an “insider”. Did he violate the insider trading laws? Argue one way or the other but support your argument.

Assume these facts as true. Sen Loeffler attended the above described hearing chaired by Sen. Burr. When she returned home that evening, she told her husband about the hearing. Her husband is Chairman of the New York Stock Exchange. The next day, without telling his wife, he sold $3.5 million worth of stock jointly owned with his wife. He saved $600,000.00 in losses by selling his stock then. Was Sen Loeffler or her husband an “insider”? Did either of them violate the insider trading laws? Argue one way or the other.

Answer 1

Ans.

Case 1

Insider trading is trading in stock by a person having access to confidential or non-public information about the company. it is also considered as insider trading when someone learns of materials, non-public information and uses that to trade stock. It means that the trader knew something or some news which the public did not know. Stock Act of 2012, that prohibits the member of Congress from using non-public information gained from their official position for personal benefits.

In the above case, Sen. burr's position as Senate Intelligence Committee chairman does give him to a great deal of information that is not publically available. Moreover, his sales were well-timed as only two weeks later of his sales the threat of coronavirus became known to the public and the stock market lost much. This indicates a clear violation of insider trading law and Sen burr should be considered as an "Insider".

Case 2

As per the insider trading law, Those friends or relatives who receive tips or non-public information from an insider, that may influence publicly traded stocks price becomes imputed with the same duty as the insider. In this case, Husband of sen. Loeffler who is also the chairman of NYSE acted upon the information he received from his wife. and sold $3.5 million worth of stock without telling her. Therefore, he creates grounds for the prosecution and may be considered as an insider as there is a violation of insider trading law.