Business question

Please help paraphrase these Bolded part only because those are plagiarism. One of tutor gave me the work with 40% plagiarism and I got an F. I need you to paraphrase so I can re-submit. It will need to be submitted on turnitin so plagiarism have to be under 10%. You could either paraphrase the bolded part only or the whole thing. As long as everything is under 10% plagiarism when I use content checker. I will also ask for edit if needed.

What is insider trading? According to the Securities and Exchange Commission or SEC, the definition of insider trading is any securities transaction made when the person behind the trade is aware of nonpublic material information and is hence violating their duty to maintain confidentiality of such knowledge. Such information is referred to as (MNPI) and it includes any confidential fiduciary data that may impact the trading price of the company’s stock. Some examples are:

  • ● Unannounced stock split

  • ● An announcement the company will receive a tender offer

  • ● Unreleased buy recommendation by an analyst or brokerage

  1. Who is considered to be an “insider? The SEC rules define insiders as the following: An “insider” is an officer, director, 10% stockholder and anyone who possesses inside information because of his or her relationship with the Company or with an officer, director or principal stockholder. This rule also covers any employee who has obtained material non-public corporate information, as well as any person who has received a “tip” from an Insider concerning information about the Company that is material and nonpublic, and trades the Company’s stock or other securities. This policy also applies to your family members who reside with you, whose securities transactions are directed by you or are subject to your influence or control.

  2. Who are considered to be tippers and tippees? Tippers and Tippees are terms used in the industry to describe those with insider information (the tipper) that share it with an outsider, the tippee. The tipper is the person who has broken their fiduciary duty when consciously revealing inside information. The tippee is the person who knowingly uses such information to make a trade.

  3. When is it legal? SEC Rule 10b5-1 allows company insiders to make predetermined trades while following all insider trading laws and thus avoiding insider trading accusations. It is important to note, pre-determined which, specifies that the trade be scheduled in advance and without any material non-public information that could either positively or adversely affect the share prices. The SEC rules governing these trades are as follows:The price and amount must be specified and certain dates of sales or purchases must be noted. There must be a formula or metrics given for determining the amount, price, and date. The plan must give the broker the exclusive right to determine when to make sales or purchases, as long as the broker does so without any MNPI when the trades are being made.

  4. When is it Illegal? SEC Rule 10b-5 prohibits corporate officers and directors or other insider employees from using confidential corporate information to reap a profit (or avoid a loss) by trading in the Company’s stock. This rule also prohibits “tipping” of confidential corporate information to third parties. Insiders may be sued civilly either by the Securities and Exchange Commission (“SEC”) or by private litigants if they trade in securities while in possession of material nonpublic information concerning the issuer of the securities. They may also be charged with a criminal violation.Why does insider trading matter? it matters because Insider trading occurs when a trade has been influenced by the privileged possession of corporate information that has not been made public yet. Because the information is not available to other investors, a person using knowledge is trying to gain an unfair advantage over the rest of the market. Using nonpublic information for making a trade violates transparency. Information in a transparent market is disseminated in a manner by which all market participants receive it at the same time. Under these conditions, one investor can gain an advantage over another only through acquiring skills in analyzing and interpreting available information. If one person trades with nonpublic information, they gain an unfair advantage. This is not only unfair but also disruptive to a properly functioning market. Insider trading and the unfair advantage that it creates, would quickly undermine the confidence of the public. Investors demand transparency and equality in the market, without it, the system would fail.

What are some real-world examples of legal and illegal insider trading?We also have an example of illegal insider trading:

In December 2001, the Food and Drug Administration announced that it would not approve a new cancer drug called Erbitux from the pharmaceutical company ImClone. As a result, the company’s stock dropped rapidly. While many investors experienced losses, family and friends of the CEO of Erbitux, Samuel Waksal, were unharmed. The SEC later discovered that prior to the announcement of the FDA’s decision, numerous executives had sold their stock based on the instructions of Waksal. In fact, just days before the announcement was made, the American retail business woman, Martha Stewart, had sold 4,000 shares of the company. At this time, the stock was still trading at a high level and Stewart made nearly $250,000 on the sale. The stock ended up dropping from $50 to over $10 in the following months.Stewart claimed to have a pre-existing sell order with her broker, but it was later revealed that her broker, Peter Bacanovic, tipped her off that ImClone’s stock was going to drop. Stewart resigned as the CEO of her own company. Waksal was arrested and sentenced to more than seven years in prison and fined $4.3 million in 2003. In 2004, Stewart and her broker were found guilty of insider trading. Stewart was sentenced to a minimum of five months in prison and fined $30,000.

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