Chapter41 - CHAPTER 41 CORPORATIONSSECURITIES LAW...

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323 C HAPTER 41 C ORPORATIONS S ECURITIES L AW AND C ORPORATE G OVERNANCE A NSWER TO C RITICAL A NALYSIS Q UESTION IN THE F EATURE INSIGHT INTO E-COMMERCE CRITICAL THINKING INSIGHT INTO ENVIRONMENTAL ISSUES (PAGE 839) Clearly, continuing to use paper proxy materials and press releases printed on paper has an impact on the environment. Even when the paper is recycled, the sludge from the ink presents a problem. What might be preventing the SEC from mandating the use of online proxy materials to prevent the waste of so much paper? The lack of access to the Internet for a significant segment of the population is likely one obstacle to prescribing the dissemination of information solely online. Also, the Internet is only one medium. Printed company materials, conferences with stock analysts and others, radio, television, and the print media are others. A NSWERS TO Q UESTIONS AT THE E NDS OF THE C ASES CASE 41.1 (PAGE 847) WHAT IF THE FACTS WERE DIFFERENT? Suppose that further drilling revealed that there was not enough ore at this site to be mined commercially. Would the defendants still have been liable for violating SEC Rule 10b-5? Assuming all of the other circumstances are as they are stated in the case, the answer to this question is most probably yes, because the de fendants‟ trading was based on their possession of inside information of a material fact without its public disclosure, which is a violation of SEC Rule 10b-5. Depending on subsequent events in this hypothetical situation, however, there may not have been any injury for which a private party could recover (that is, the defendants might have lost money on their trading rather than profiting at the expense of uninformed stock sellers).
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324 UNIT EIGHT: BUSINESS ORGANIZATIONS CASE 41.2 QUESTIONS (PAGE 849) 1A. If Dabit had filed his suit only on his own behalf, rather than on the behalf of other brokers and investors, how might the result in this case have been different? The SLUSA covers only state-based class-action lawsuits that is, those in which the plaintiffs consist of, or exceed, a certain number of shareholders. If the named plaintiff here had filed the suit only on his own behalf, it would have been an individual action and likely would have been allowed to proceed. (The reason for filing a suit in which the plaintiffs comprise a class is the larger sum of money involved.) 2A. Should class action suits involving securities be limited further, or are they too restricted now? Why? Most observers would agree that the goal is to foster growth in the economy. Encouraging investment furthers this goal. Fraud on investors illegitimately reduces invested funds and profits, discouraging investment. Thus, inhibiting fraud helps to grow the economy. But subjecting businesses to unlimited suits founded on alleged fraud also hinders economic growth. A balance must be struck to allow defrauded investors to recover their losses but also to rein in those who would abuse this
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This note was uploaded on 09/23/2010 for the course BLAW blaw 4203 taught by Professor Farguson during the Spring '09 term at LSU.

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Chapter41 - CHAPTER 41 CORPORATIONSSECURITIES LAW...

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