Acct case - A crisis is going to break out in St....

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A crisis is going to break out in St. Genevieve. James knows every detail of the insider trading. In this situation, James’s decision is crucial. Here comes a dilemma for James, should he inform SEC? The answer is NO; it is based on three reasons. First of all, all the shareholders of the company will have to pay the price if James discloses the information. Imagine someone is a manager of a hedge fund; he has a huge amount of St Genevieve shares in hand. Then, suddenly, he heard about the news of the company is now being investigated by SEC. What would he think? He must sense the insecurity of his capital invested. The best way to do is to sell all the shares at a lower price as soon as possible to get back the money. Selling a huge amount of shares in such a short period of time will cause the share prices to drop sharply. It is a chain reaction; the process goes on and on. Finally, all shareholders have to suffer. Many may claim that James should disclose the information; their opinion is based on
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This note was uploaded on 12/31/2011 for the course ACCT 101 taught by Professor Mayday during the Spring '11 term at Ave Maria.

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Acct case - A crisis is going to break out in St....

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