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Should the owner of the company can be prosecuted for convincing a friend to buy his share after he knew his product sale will increase?
Wiki User
∙ 10y ago
You mean something like this: Mr. Smith runs Smith Food who makes frozen pies, and he just received a standing order for enough pies that he'll need to add a second shift. He knows that when word of this gets out his stock price will go up quite a bit, so he calls his friend Mr. Brown and tells him to buy lots of Smith Food stock right now before he calls the press to tell them about the contract. That is a clear-cut case of insider trading and yes, Mr. Smith should be prosecuted for it.
The question unasked: should Mr. Brown be prosecuted? If he reasonably knew this was an insider transaction - his friend never asked him to buy his stock before, and suddenly he calls up "Buy all the stock you can get! Throw a million bucks in your margin account! Trust me! You won't be sorry! You'll be richer than everyone on your block!" then Mr. Brown could reasonably have thought he was passing inside information and therefore he not only had a duty NOT to buy the stock but also to call the Securities and Exchange Commission and rat out his friend. Failing to do either is a crime. If, on the other hand, Mr. Brown asks Mr. Smith to buy his stock every Tuesday while they play Golf, and he never discloses specific information about the company, the SEC might say no insider information was disclosed.
Wiki User
∙ 10y ago
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