Question

What are circuit breakers and why do we have them?

What type of conditions would you consider short selling a stock?

What type of evidence would we use to determine if someone traded on inside information?

Answer 1

1.Fuse and circuit breaker have the same function.....protect electrical overload. Without it, as overload or short circuit happen, electrical wire may turn into a red hot wire then burn down anything near the wires.

Fuse is a one time usage device. If it burnt out,it requires a replacement and you need someone whom knew how to due with electricity to replace a fuse.

Circuit breaker at least gives you more than one chance to restore the power or making any electrical device working one more time. The advantage is....you do not need an electrician to reset the circuit breaker (press the RESET BOTTON or SWITCH BACK THE BREAKER FROM OFF TO ON AGAIN).

Device like motor using circuit breaker because the current vary to much. It last much longer than a fuse using on motor overload protection. Other constant current device like microwave oven using a fuse to do the protection. Of course,different manufacture has its own chose to choose to use a fuse or a circuit breaker.
A house electricity supply panel using both fuses and circuit breakers to do a better job.

Relay is a coil with contacts. It acts like a remote switches. Some overload safety circuit using relay to cut off the power. But the principle of relay is different than a circuit breaker, and a relay never can be used as a fuse.

2. Investors consider short selling when they expect that a stock's price to decrease. Investors submit the order to their broker who borrows the stock on behalf of the investors and sells the stock. The investors will ultimately need to purchase the stock that they borrowed. Their gain is the difference between the price at which they sold the stock versus the price at which they purchased it. If the stock price declined over time, they should have been able to purchase the stock for a lower price at which they sold it.

3. Generally, insider trading means profiting on “material, non-public information.” It can be committed by an insider, such as a company executive, or an outsider who gets information from an insider. Merely obtaining inside information is not illegal. A journalist, for example, can use inside sources to glean earnings data before it is disclosed and legally use it for a story. But the reporter would be breaking the law if he used that knowledge to buy the firm’s stock before an announcement drove the price up.

In the textbook case, it is not illegal to trade on information that one overhears on a train or at the ballpark, so long as you don’t know it is material, non-public information. But an investment banker or lawyer helping a firm prepare a merger would clearly be breaking the law by trading on the information. “If something like that happens, it’s really shocking in terms of corporate ethics,” says Wharton finance professor Richard Marston.

Proving that someone has been responsible for a trade can be difficult because traders may try to hide behind nominees, offshore companies, and other proxies. The Securities and Exchange Commission prosecutes over 50 cases each year, with many being settled administratively out of court. The SEC and several stock exchanges actively monitor trading, looking for suspicious activity. The SEC does not have criminal enforcement authority, but can refer serious matters to the U.S. Attorney's Office for further investigation and prosecution.