Other common law governing insider trading are the Insider Trading Sanctions Act of 1984 and the Insider Trading and Securities Fraud Enforcement Act of 1988 (Miller & Jentz, 2009). These two acts are instrumental in mitigating illegal insider trading activities in the stock exchange market. The laws impose penalties of up to three times any profits gained through illegal insider trading.
Just to be appreciated is the fact that such amount of fine is equally applicable for any losses that were avoided through illegal trading (Miller & Jentz, 2009). Moreover, the laws also provides for potential banning of companies involved in illegal trading depending on the level of such activities. The collapsing of major American public corporations such as Enron, WorldCom, and squeaky clean Martha Stewart prompted the enactment of the Sarbanes-Oxley Act of 2002.
The act seeks to establish a streamlined framework for mitigating financial scandals both by auditing firms as well as in the proceedings of the SEC (Miller & Jentz, 2009). By dictating for the formation of Public Company Accounting Oversight Board (PCAOB) which dictates qualification of auditors; such are no doubt crucial in ensuring sanity in the accounting profession. In addition, this act makes it mandatory for the SEC to qualify financial statements from corporations enlisted in the stock market.
SEC regulations Insider trading is governed by a number of provisions of the SEC rules and regulation. In its fair disclosure requirements, the SEC dictates that a company is bound by the law to disclosure non-public information to the public in the event it happens to do so intentionally to an individual (Macey, 1991). If such disclosures were not intentional, the organization should communicate the same to the general public. Another important rule on insider trading is defined in SEC Rule 10b5-1.
According to this rule, prohibition against insider trading should not only be based on whether non-public information was used during the trade, but even mere possession of such information amounts to a violation of the rule. The provisions of Williams Act of 1968 on takeovers and tender offers also give the SEC powers to regulate insider trading. By definition, the Williams Act is an amendment to the 1934 Securities and Exchange Act.
The Act dictates for mandatory full and fair disclosure of information involving tender offers (Macey, 1991). According to its provisions, if a company seeks to acquire or control another through securities, such intentions should be communicated to SEC through fillings and in written to the company to be acquired. The aim of this law is to ensure fair benefiting of the stakeholders as well as allowing the management equal opportunity to make any defense case in a fair manner.
Just to be appreciated is the fact that such amount of fine is equally applicable for any losses that were avoided through illegal trading (Miller & Jentz, 2009). Moreover, the laws also provides for potential banning of companies involved in illegal trading depending on the level of such activities. The collapsing of major American public corporations such as Enron, WorldCom, and squeaky clean Martha Stewart prompted the enactment of the Sarbanes-Oxley Act of 2002.
The act seeks to establish a streamlined framework for mitigating financial scandals both by auditing firms as well as in the proceedings of the SEC (Miller & Jentz, 2009). By dictating for the formation of Public Company Accounting Oversight Board (PCAOB) which dictates qualification of auditors; such are no doubt crucial in ensuring sanity in the accounting profession. In addition, this act makes it mandatory for the SEC to qualify financial statements from corporations enlisted in the stock market.
SEC regulations Insider trading is governed by a number of provisions of the SEC rules and regulation. In its fair disclosure requirements, the SEC dictates that a company is bound by the law to disclosure non-public information to the public in the event it happens to do so intentionally to an individual (Macey, 1991). If such disclosures were not intentional, the organization should communicate the same to the general public. Another important rule on insider trading is defined in SEC Rule 10b5-1.
According to this rule, prohibition against insider trading should not only be based on whether non-public information was used during the trade, but even mere possession of such information amounts to a violation of the rule. The provisions of Williams Act of 1968 on takeovers and tender offers also give the SEC powers to regulate insider trading. By definition, the Williams Act is an amendment to the 1934 Securities and Exchange Act.
The Act dictates for mandatory full and fair disclosure of information involving tender offers (Macey, 1991). According to its provisions, if a company seeks to acquire or control another through securities, such intentions should be communicated to SEC through fillings and in written to the company to be acquired. The aim of this law is to ensure fair benefiting of the stakeholders as well as allowing the management equal opportunity to make any defense case in a fair manner.
Source: law aspect
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