CASE STUDY 3 Major insider trading cases in the United States The United States has the two biggest stock exchanges in the world namely the New York Stock Exchange and NASDAQ which had a market capitalization of 19223 billion and 6831 billion respectively in January, 2015. They are both based in New York. Due to the high volume of trading involving large amounts of money, insider trading is quite rife. A. Ivan Boesky ($200 million) in the early 1980s Boesky used information from Wall Street insiders to time his trades and manipulate markets. Prosecutors said he received $3 billion in leverage from junk bond king Michael Milken. The scheme worked until the Feds caught up with Boesky who gave up his associates. He even recorded conversations …show more content…
Doug Whitman ($935,000) in 2009 Whitman managed more than $100 million through his Whitman Capital hedge fund. At the trial, prosecutors produced a series of secretly recorded phone calls during which Whitman was heard discussing moles and having conversation about sending presents to sources. Three cooperating witnesses testified about how they regularly shared inside information with Whitman. He was convicted in 2012 of insider trading charges involving stocks of Google, Polycom and Marvell Technology Group. He was sentenced to two years and fined $250,000. Insider trading regulations in the United States Statutory law - Section 15 of the Securities Act of 1933 contained prohibitions of fraud in the sale of securities which were greatly strengthened by the Securities Exchange Act of 1934. Section 16(b) of the Securities Exchange Act of 1934 prohibits short swing profits from any purchases and sales within any six month period. The Insider Trading Sanctions Act of 1984 and the Insider Trading and Securities Fraud Enforcement Act of 1988 place penalties for illegal insider trading as high as three times on the profit gained or loss avoided from the illegal …show more content…
In 1909, the Supreme Court of the United States ruled in Strong v Repide that a director who expects to act in a way that affects the value of shares cannot use that knowledge to acquire shares from those who do not know of the expected action. In SEC v Texas Gulf Sulphur Co, a Federal court stated that anyone in possession of inside information must either disclose the information or refrain from trading. Officers of the Texas Gulf Sulphur Corporation had used inside about the discovery of The Kidd Mine to make profits by buying shares and call options on company