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Why Is Martha Stewart Illegal

688 Words3 Pages

Insider trading can be legal or illegal. In Martha Stewart’s case it was illegal. When many people hear the term “insider trading” it would be look at as a crime. Insider training is the trading of a public company stock or other securities by individuals with access to nonpublic, or insider information about the company. On December 27, 2001 highly publicized Martha Stewart sold all of her shares in the biotech company ImClone. Only two days later ImClone stock would fall 16%. By Martha selling right before the FDA’s announcement she avoided losing over 45,673 of her net worth. The main scope of the case is the scrutinizing of the insider trading which determine whether, Martha Stewart or her counterparts had a case to answer or not. The case against Martha Stewart proved to be more complicated than most imagined. Over the course of the investigation, the SEC came to the conclusion that Stewart had acted on a piece of nonpublic information, but the information was not yet explicit knowledge of the FDA's decision of ImClone's approval. Stewart had actually acted upon a tip from her Merrill Lynch broker, Peter Bacanovic, whom also worked with Waskal. Bacanovic knew Waskal was attempting to unload a large stake into his company, but he did not know why. Bacanovic tipped Stewart off on Waksal's actions lead to Stewart selling of …show more content…

If Stewart traded based on knowledge of the FDA decision, the case may have been strong, but Stewart only had knowledge that Waskal had sold his shares. This would have built a stronger case using insider trading. Then it would have to be proved that the sales have violated some type of duty of Stewart's. Which will refrain from trading based on the information that was given. She did, however, act on a tip that she knew violated her broker's duty. It could been proved that she knew her actions were questionable and

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