Business Law Week 8 Assignment

Generally , markets are regulated in a competitive environment to counteract or prevent market failure (Niemeyer , 2001 ,

.5 . Moloney (2002 ,

.6 ) posits that the major preoccupation of securities regulation has to do with asymmetries of information and externalities which are typical market failures in the securities market

1 . Rules and Regulations Regarding Corporate Stocks , Bonds and Securities Regulation : The cornerstone of securities regulation in the United States of America is the Securities Act 1933 . The 1933 Act regulates the sale of corporate stocks , bonds and other forms of securities . The main

ethos of the 1933 Act is to make available to investors , financial information and other important information relating to a security that is being tendered for public sale , and to prevent fraud , deception or misrepresentation (U .S . Securities and Exchange Commission , n .d

Registration of a bond , stock or security is a foundational prerequisite before it can be tendered for public sale . Section 10 of the Securities Act 1993 lays down rules and regulations on matters relating to information provided during registration of bonds , stocks or securities (U .S . Securities and Exchange Commission , n .d . Disclosure of vital information is foundational in registering a bond , stock or security . This requirement is evidently for the purpose of protecting investors from misrepresentation or falsification of information provided in a company 's prospectus . The Securities and Exchange Commission (S .E .C ) is thus empowered to at any time issue an preventing or suspending the use of a prospectus . if it has reason to believe that such prospectus has not been d . or includes any untrue statement (Securities Act 1933 section 10b

Information provided during registration must also describe the company 's business and assets , the security being tendered for sale information concerning the company 's management , and the company 's financial statements that must be certified by independent accountants The S .E .C . also requires companies whose assets are more than 10 million and who have owners holding more than 500 securities , to make public annual and periodic reports

Rules against `insider dealing ' or insider trading are also crucial in the regulation of company stocks , bonds and securities . Under the S .E .C 's `Full Disclosure ' rule , companies are obliged to concurrently make public any material non-public information that it intentionally divulges to one person . It is thus unlawful for anyone with material non-public information to make use of that information to purchase or sell securities or to inform others to do the same (United States of America v . Martha Stewart and Peter Bacanovic . Also as established by the Supreme Court in United States v . Carpenter (1986 , one cannot exploit a fiduciary position for personal profit if that position makes one privy to special information . Use of that privileged special information to trade is thus akin to insider trading

2 . Summary of Facts Relating to the Imclone and Martha Stewart Situations

i . Imclone was due to receive information from the Foods and Drugs Administration on its new cancer drug and...