A drug company applied for the approval of the Food and Drug Administration (FDA) to market...

A drug company applied for the approval of the Food and Drug Administration (FDA) to market a miracle drug that the company believed could cure some cancers. During the period that the application was under consideration the company's stock rose to $65 per share. The president of the company learned that the FDA application was about to be denied. You are a personal friend of the president, and he told you that he believed that the stock will start trading downward. You sell 4,000 shares of stock which you purchased for $10 per share. Your decision appears to be a good one since you made a profit of about $200,000. When questioned about the sale by an investigator from the Securities and Exchange Commission, you state that the sale was because of a preexisting arrangement to sell the shares when the price fell below $60 per share. Following the announcement that the FDA application was denied, the stock went to $7 per share.

Did you commit a crime when you sold the stock?
Did you commit a crime in your answer to the federal agent?
Were you part of an illegal conspiracy?

Solutions

Expert Solution

We have given a hypothetical for consideration and asked to provide an answer to the questions provided.

.Yes, we committed a crime when we sold the stock because the information that we received was confidential from a source with intimate knowledge of company financial information. We have committed a crime commonly referred to as insider trading.Which is a criminal securities fraud under Section 32(a) of the Securities Exchange Act of 1934,as amended by the Sarbanes-Oxley Act of 2002. We were also potentially guilty of Mail and wire fraud and conspiracy.

.Yes, We committed a crime with our answer to the federal agent. Since our answer was a lie we are guilty of obstruction or justice in an investigation. By definition obstruction of justice occurs when a person knowingly intends to interfere in any manner at any level with any demand made by any civil investigation under the Antitrust Civil Process Act (ACPA) by any means to include destruction of evidence,threats, coercion and via any method of communication.

.Yes we were part of an illegal conspiracy because together the president of the company and we mutually understood that we were willingly performing an illegal act where the selling of the stock represented the over action.

** I hope you understand the solution. If yes then please rate me up.
If not then please comment for solving doubt. And don’t forget to Rate.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The Food and Drug Administration (FDA) is asked to approve a new drug. The new drug...

The Food and Drug Administration (FDA) is asked to approve a new drug. The new drug should contain less than 25mg of the active ingredient “toxin”, which is assumed to have dangerous side effects. The FDA would like to restrict the error of “approving the drug despite its too high content of toxin” to a maximum risk of 5% (α ≤ 0.05). Let Xi : “ The content of toxin in the i-th pill [in mg].” ∼ N(µ, σ2 )...

The U.S. Food and Drug Administration (FDA) requires nutrition labeling for most foods. Under FDA regulations,...

The U.S. Food and Drug Administration (FDA) requires nutrition labeling for most foods. Under FDA regulations, manufacturers are required to list the amounts of certain nutrients in their foods, such as calories, sugar, fat, and carbohydrates. This nutritional information is displayed on the food’s package. Calories (C) Sugar (S) Fat (F) Carbohydrates (R) 100 12 0.5 25 130 11 1.5 29 100 1 2 20 130 15 2 31 130 13 1.5 29 120 3 0.5 26 100 2 0...

1. The The Food and Drug Administration (FDA) requires which ONE of the following products to...

1. The The Food and Drug Administration (FDA) requires which ONE of the following products to contain specific levels of microbial inhibitors or acidifying agents such as phosphoric or citric acid to prevent production of Clostridium botulinum toxin in the product? (NOTE: An anaerobic environment is present in both bottled and canned products. ) Hint: Look at the lecture slides that discuss how some of these products are made. You can also look up specific information for these items on...

1. The The Food and Drug Administration (FDA) requires which ONE of the following products to...

The U.S. Food and Drug Administration (FDA) recently approved the marketing of a new chemical solution,...

The U.S. Food and Drug Administration (FDA) recently approved the marketing of a new chemical solution, Caridex, which disolves cavities. In a study conducted by dental researchers at Northwestern University, 21 of the 35 patients with cavities preffered treatment with Caridex to drilling (Gainesville Sun, Feb. 11, 1988). Find a 90% confidence interval for the true proportion of dental patients who prefer having cavities dissolved with Caridex rather than drilled. (0.46,0.74) (0.44,0.76) (0.39,0.81)

(20pts) The Food and Drug Administration (FDA) has established an upper tolerance of 5 parts per...

(20pts) The Food and Drug Administration (FDA) has established an upper tolerance of 5 parts per billion for the cancer-causing substance nitrosamine in beer. Suppose that Pabst and Miller are identified by the FDA as containing excessive concentrations of nitrosamines and are tested by an independent testing agency with the results shown in the accompanying table (in parts per billion). Also suppose that 36 bottles were randomly selected from each brand. Stat. Pabst Miller -------- ----- ------ Mean 5.25 5.31 Std. Dev. 1.20 1.44 Specify the null...

1. In 1995, the Food and Drug Administration (FDA) published new labeling standards for bottled water....

1. In 1995, the Food and Drug Administration (FDA) published new labeling standards for bottled water. (The full text of the final rule can be found at http://cfr.vlex.com/vid/165-110-bottled-water-19705533.) Prior to that time, bottlers could sell regular tap water under a bottled water label. In fact, the FDA estimated that approximately 25 percent of the supply of bottled water was nothing more than ordinary tap water. (a) Consider how these tougher standards eliminated 25 percent of the supply of bottled water....

XYZ Pharmaceutical, Inc. just got FDA approval for their new drug, Viagrina. The company has never...

XYZ Pharmaceutical, Inc. just got FDA approval for their new drug, Viagrina. The company has never paid a dividend, but they expect to pay one for the first time by the end of the year. The expected dividend is $3.00 per share and the company expects that dividend to increase at a rate of 20% for five years. After that, XYZ expects to see its dividend growth limited by the growth rate the US economy, which on average is 4.5%...

The FDA is the administrative agency that oversees the food and drug industry in America. There...

The FDA is the administrative agency that oversees the food and drug industry in America. There are two types of administrative agencies. Identify the two types of administrative agencies, and identify what makes them different. What types of administrative agency is the FDA and what are the functions of the FDA?

The Food and Drug Administration will allow a food product to be labeled “sodium free” only...

The Food and Drug Administration will allow a food product to be labeled “sodium free” only if there is strong evidence that it contains, on average, less than 5 milligrams of sodium per serving. A soft drink producer, wishing to use a “salt free” label, has its product tested. A laboratory takes 25 independent sample servings of the soft drink and measures them for sodium content using a technique that is practically free of bias. These measurements average 4.9 milligrams...

Subjects