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Insider Activity and Corporate Malfeasance

Insider activity and corporate malfeasance are dangerous practices that threaten company assets and resource security for numerous reasons. According to the U.S. Securities and Exchange Commission vs. Martha Stewart and Peter Bacanovic (2003), any securities fraud carries severe liability and real criminal penalties. However, the example of Martha Stewart and her broker associate reflects a case of personal liability for illegal insider activities. At the same time, individual cases of corporate malfeasance have serious implications for the safety of a large number of clients. According to Kendall (2020), in the era of pandemic and social isolation, many business firms have stalled, which prompts unscrupulous entrepreneurs to break the law. As an example, the author mentions cruises on large liners and notes that incidents of the violation of passenger safety rules by carriers are the result of illegal insider activities (Kendall, 2020). Constant (2020) provides an example of securities fraud in the aviation industry and notes that this practice helps maintain a stable market position. The situation is complicated by the fact that if appropriate measures are not taken, illegal work will expand, for instance, through fictitious trust funds.

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Martha Stewart’s case shows that corporate malfeasance is generally associated with unlawful managers’ activities. However, as Kendall (2020) states, in small companies, personnel can also be involved in such criminal schemes. For managers, engaging subordinates in insider activities is an undesirable phenomenon since the key essence of such crimes is the concealment of profits and the accumulation of capital through fraud with securities. If an insider makes deals in the period before or after important corporate news, the decision to manipulate securities is dictated by the knowledge of some information that is not available to other market participants. The pandemic is one of the factors that can stimulate business owners to engage in illegal activities. Martha Stewart’s example confirms that the upcoming fall in share prices was predictable, and, as a result, the director’s violation took place.

References

Constant, P. (2020). Coronavirus didn’t bring the economy down – 40 years of greed and corporate malfeasance did. Business Insider. Web.

Kendall, C. H. (2020). Corporate criminal liability in the COVID-19 era. Law Journal Newsletters. Web.

U.S. Securities and Exchange Commission vs. Martha Stewart and Peter Bacanovic (2003), 03 Civ. 4070 (NRB).

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StudyCorgi. 2022. "Insider Activity and Corporate Malfeasance." April 12, 2022. https://studycorgi.com/insider-activity-and-corporate-malfeasance/.

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StudyCorgi. (2022) 'Insider Activity and Corporate Malfeasance'. 12 April.

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