The Legal Environment of Business: Text and Cases
10th Edition
ISBN: 9781337535878
Author: Frank B. Cross; Roger LeRoy Miller
Publisher: Cengage Learning US
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 23, Problem 2RE
Assume that the Securities and Exchange Commission (SEC) has a rule that it will enforce statutory provisions prohibiting insider trading only when the insiders make monetary profits for themselves. Then the SEC makes a new rule, declaring that it will now bring enforcement actions against individuals for insider trading even if the individuals did not personally profit from the transactions. In making the new rule, the SEC does not conduct a rulemaking procedure but simply announces its decision. A stockbrokerage firm objects that the new rule was unlawfully developed without opportunity for public comment. The brokerage firm challenges the rule in an action that ultimately is reviewed by a federal appellate court. Using the information presented in the chapter, answer the following questions.
Suppose that the SEC asserts that it has always had the statutory authority to pursue persons for insider trading regardless of whether they personally profited from the transactions. This is the only argument the SEC makes to justify changing its enforcement rules. Would a court be likely to find that the SEC’s action was arbitrary and capricious under the Administrative Procedure Act (APA)? Why or why not?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
When a corporation wishes to issue certain securities, it must provide sufficient information for an unsophisticated investor to evaluate the financial risk involved. Specifically, the law imposes liability for making a false statement or omission that is "material."
What sort of information would an investor consider "material" pursuant to the Securities Exchange Act of 1934? Be sure to explain the Act and provide two recent case examples where material representation or omission amounted to securities fraud in violation of SEC Rule 10b-5.
The Federal Trade Commission (FTC) files suit against Yange Corp. under § 2 of the Sherman Act. To be successful,
the FTC must prove that Yange Corp. possesses monopoly power in the relevant market and that the monopoly
power was obtained by illegal means. The FTC has no direct evidence that Yange is using its power to control prices
and restrict output. The FTC, therefore, must show that Yange Corp. has monopoly power indirectly, by showing that
Yange Corp. has a dominant share of the relevant market and that there are significant barriers for new competitors
entering that market. The FTC can calculate the market share that Yange Corp. has by:
showing the total sales that Yange Corp. has ever had.
×
showing the net revenue that Yange Corp. had during their year of highest profits.
looking at the company's sales compared against the total sales of the industry within a specific
period.
taking the total sales of the industry over one year, and comparing against industry sales over prior…
The Securities and Exchange Commission today charged Ernst & Young LLP (EY) forcheating by its audit professionals on exams required to obtain and maintain CertifiedPublic Accountant (CPA) licenses, and for withholding evidence of this misconductfrom the SEC’s Enforcement Division during the Division’s investigation of the matter.EY admits the facts underlying the SEC’s charges and agrees to pay a $100 millionpenalty and undertake extensive remedial measures to fix the firm’s ethical issues.“This action involves breaches of trust by gatekeepers within the gatekeeper entrustedto audit many of our Nation’s public companies. It’s simply outrageous that the veryprofessionals responsible for catching cheating by clients cheated on ethics exams ofall things,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division. “Andit’s equally shocking that Ernst & Young hindered our investigation of this misconduct.
This action should serve as a clear message that the SEC will not…
Chapter 23 Solutions
The Legal Environment of Business: Text and Cases
Ch. 23 - Assume that the Securities and Exchange Commission...Ch. 23 - Assume that the Securities and Exchange Commission...Ch. 23 - Assume that the Securities and Exchange Commission...Ch. 23 - Prob. 4RECh. 23 - Prob. 1ISCh. 23 - Prob. 2ISCh. 23 - Prob. 1BSCh. 23 - Informal Rulemaking. Assume that the Food and Drug...Ch. 23 - Rulemaking. The Investment Company Act prohibits a...Ch. 23 - Prob. 4BCP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, subject and related others by exploring similar questions and additional content below.Similar questions
- Considering the following statements true or false. 1.Circumstances whereby the CFA member breaches client confidentiality are acceptable in circumstances directed by the client in writing. 2.Mosaic theory damages the interest of all investors by disrupting the smooth functioning of forward markets and lowering investor confidence. 3.As a philosophical ethical principle, when analysing actions undertaken, it is acceptable that an act can be seen as good or bad regardless of the underlying/relevant circumstances. 4.As part of Standard IV, as a superior, it is not your responsibility to ensure ethical behaviour of your subordinates. 5.Premium investment services should be designed in such a way that, while beneficial to those who are in a position to take advantage of them, they are not unfairly disadvantages to other classes of clients.arrow_forwardDuties and Liabilities of Corporate Directors Discuss the extent to which a director should be held liable for breaching his or her duty of care if he or she simply neglects to read materials regarding issues to be voted on at board meetings or neglects to show up for these meetings. 2. Should such a person be equally or less liable than a director who knowingly votes to approve an illegal or harmful act?arrow_forwardIn US Supreme Court case O'Hagan v. United States (1997), O'Hagan was a lawyer working for Grand Met, a company that was secretly planning to make a tender offer for the stock of Pillsbury, the 'target' firm. O'Hagan bought call options on that stock before Grand Met offer went public. The misappropriation theory articulated by the Court's majority in this case is also called the theory of 'outsider' (rather than 'insider') trading. That is because 0'Hagan was not an insider of Pillsbury, the target. He was an outsider who did not owe a fiduciary duty to the shareholders of Pillsbury. The Court's majority held that he did, however, owe a fiduciary duty to Grand Met, the outside firm holding private material information releyant to the future value of Pillsbury stock.(T/F/U and Why?)arrow_forward
- Franchising is a method of distributing products or services involving a franchisorthat establishes the brand's trademark, trade name, business system, and afranchisee who pays a royalty and an initial fee for the right to do business underthe franchisor's name and system. It is a contractual business relationship. Whatdo you think is the prime advantage and disadvantage in having a business ofthis nature?arrow_forwardExplain the unified code of conduct for business (integrity initiative)arrow_forward3. Regulation of private pension plans Which of the following are provided by federal regulations of private pension plans? Check all that apply. Insurance of all participants in private defined-benefit plans to receive their benefits upon retirement Transferability of vested pension funds upon a change of employment Insurance of only executive employees participating in private defined-benefit plans to receive their benefits upon retirement Insurance of all participants in private defined-contribution plans to receive their benefits upon retirement Tax benefits only for executive employees Which of the following are the characteristics of the Pension Benefit Guaranty Corporation (PBGC)? Check all that apply. Has no regulatory powers May act as the pension fund manager Affected by economic conditions Has vast regulatory powersarrow_forward
- Lowe’s Companies, Inc. is a business supply and home improvement retailer incorporated in Mooresville, North Carolina. If Lowe’s Companies, Inc. opens a store in any state in the United States other than North Carolina, it will be considered which of the following in that state? A. A domestic corporation B. A closed corporation C. An alien corporation D. A foreign corporationarrow_forwardPls help ASAParrow_forwardThe Chairman of the Federal Reserve, nominated by the President; may be removed and replaced by the President at will. O by the Supreme Court of the United States. by the President but only "for cause" based on legal grounds. O by the Federal Reserve Board of Governors.arrow_forward
- Describe the role and workings of (1) the Consumer Product Safety Commission (CPSC) and (2) the Consumer Financial Protection Bureau (CFPB).arrow_forwardYou are President and CEO of Apex Business Systems, Inc. (Apex). Apex, through its purchasing agent, bought a new microwave from Inki Appliances Company (Inki) who sells microwaves on a daily basis. There was no written or oral warranty given when the sale was made. The microwave stopped working one week after it was placed it in the company kitchen. Assume also that nobody misused the microwave or in any way caused it to quit working. The purchasing agent returned the microwave three days after it quit working. The owner of Inki refused to repair or replace the microwave or offer a refund. Prepare a demand letter to be sent to Inki.arrow_forwardPlease do not give solution in image formate thanku.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
BUSN 11 Introduction to Business Student EditionBusinessISBN:9781337407137Author:KellyPublisher:Cengage Learning
Essentials of Business Communication (MindTap Cou...BusinessISBN:9781337386494Author:Mary Ellen Guffey, Dana LoewyPublisher:Cengage Learning
Accounting Information Systems (14th Edition)BusinessISBN:9780134474021Author:Marshall B. Romney, Paul J. SteinbartPublisher:PEARSON
International Business: Competing in the Global M...BusinessISBN:9781259929441Author:Charles W. L. Hill Dr, G. Tomas M. HultPublisher:McGraw-Hill Education
BUSN 11 Introduction to Business Student Edition
Business
ISBN:9781337407137
Author:Kelly
Publisher:Cengage Learning
Essentials of Business Communication (MindTap Cou...
Business
ISBN:9781337386494
Author:Mary Ellen Guffey, Dana Loewy
Publisher:Cengage Learning
Accounting Information Systems (14th Edition)
Business
ISBN:9780134474021
Author:Marshall B. Romney, Paul J. Steinbart
Publisher:PEARSON
International Business: Competing in the Global M...
Business
ISBN:9781259929441
Author:Charles W. L. Hill Dr, G. Tomas M. Hult
Publisher:McGraw-Hill Education
What are administratve agencies; Author: The Business Professor;https://www.youtube.com/watch?v=dhAt9vBlv9A;License: Standard Youtube License
Linear Programming - Graphical Solution; Author: Don't Memorise;https://www.youtube.com/watch?v=qQFAvPF2OSI;License: Standard YouTube License, CC-BY