The United States Securities and Exchange Commission (SEC) has implemented several guidelines and rules to protect investors from the dishonest malpractices of directors and managers of different companies whenever selling or buying shares. Securities frauds are offenses that have the potential to affect the economic gains of businesspeople while at the same time putting big corporations at risk. The selected case for this discussion revolves around the issue of insider trading whereby Christopher Collins misused his position as a board member of a given pharmaceutical company to disclose nonpublic information.
Main Issue
Insider trading is a form of fraud that occurs when an individual or investor who has access to confidential information sells or buys security (Eliason, 2018). Such an offense satisfies the characteristics of securities fraud or scams. The selected issue revolves around a congressman (Christopher Collins) who dumped his shares just before Innate Immunotherapeutics Limited’s stock price plummeted. This happened after it released an unpleasant report to do with its latest clinical trials for a new drug. Other individuals involved in this scandal included Cameron Collins and Stephen Zarsky.
Evidence
The investigation conducted by the SEC revealed that Christopher Collins was aware of the above company’s nonpublic information surrounding the anticipated clinical trials for a drug that was in development. With this kind of understanding, Collins contacted Cameron Collins to inform him about the bad news. Before the clinical results of the drug became public, Cameron Collins had sold over 1.39 million shares based on the received information (Spina, 2018).
Consequently, he managed to avoid a loss of around 571,000 US dollars. Cameron Collins went further to share the same message with other people, including Stephen Zarsky, his girlfriend, and one of his friends. Stephen Zarsky spread the same information to different members of his family. This means that the defendants violated Section 10(b) of the Exchange Act of 1993.
Resolution
Using the collected evidence, SEC filed a complaint against Cameron Collins, Stephen Zarsky, and Christopher Collins in a New York court. The judge indicated that Christopher Collins and others had committed securities fraud by conspiring to sell their shares before the identified company’s stock price plummeted (Spina, 2018). This was after confidential information became available to them. Such malpractices resulted in a situation whereby Collins’ family members benefited significantly from an illicit transaction.
According to the prosecutors, there was a need for the New York court to charge the trio with insider trading since such offenses could jeopardize the performance of many companies in the country (Spina, 2018). This would also become a lesson for all other individuals or board members who were planning to commit similar offenses. After the charges were pronounced, the speaker of the House went ahead to strip the accused of his position as a member of the Energy and Commerce Committee (ECC).
Conclusion
The above discussion has revealed that securities fraud is a serious offense that will result in prosecution. Such a crime amounts to corruption and can affect the integrity of stock markets across the world. Stakeholders in different companies or industries should consider the case of Christopher Collins and avoid similar malpractices in the future since they may lead to legal problems. Those found guilty can lose their careers or get imprisoned depending on the nature or weight of the presented case.
References
Eliason, R. (2018). Corruption in Congress: Chris Collins and Duncan Hunter. Sidebars.
Spina, M. (2018). Here’s how prosecutors say Chris Collins’ insider trading unfolded. The Buffalo News. Web.