Basic Legal Principles
The Federal Security Laws defined under US constitution provides a series of statutes that provides guidelines and regulations to govern activities of the security industry (Hazen, 2003). The Securities Exchange Act of 1934 and the Securities Act of 1933 are the principal statutes under the Federal Security Laws. According to the e
Legal and Ethical scenario presented in the Dracca’s case, the following responses are applicable;
Dracca’s senior Vice President of Sales, Bob Marley and his sale representative counterpart Farian did commit a security violation under laws relating to insider trading (McInish, Frino, and Sensenbrenner, 2011). This can be attributed to the manner in which they acted on non-public (insider) information and sold securities in order to prevent incurring personal losses. During the analysis process, the factor that the court could consider is acting on insider information collected from the conference call (Loss, & Seligman, 2004). Another factor that the court might consider is using insider information to transact dealings in company’s securities for personal interests. The analysis for both Marley and Farian will follow a similar process because they are both employees of Dracca.
Response to Question 2
Based on Farian’s statement, it can be presumed that they committed a security violation. Section 10(b) of the Securities Exchange Act of 1934 covers the sale of stock and insider trading falls under this category (Hazen, 2003). The procedure used to sell the securities is unethical because both Farian and Marley tried to take advantage of insider information to not only gain personal benefits but also prevent the incurrent of losses. They took illegal and unethical advantage of the information they obtained from the conference call.
Response to question 3
Concerning the VGV’s ethical issue associated entails took advantage of Dracca’s trust and adopted strategies to enable him escape from his liabilities. The legal issue can be explained from the security perspective such that using the machine was as collateral for the loan and hypothecated, there was no right to sell the machine without obtaining consent from Dracca. Again, Dracca had the full right to sell the machine and recover debts owned if the machine had been used as collateral
Response to question 4
It is advisable that Dracca initiate a negotiation for a settlement amount with VGV. The negotiation should be aimed at resolving the ethical and unethical considerations in a harmonious manner. Dracca should also remind VGV regarding the credit extended by Dracca based on grounds of a good relationship. This should ensure that the situation is settled without the court’s intervention. Failure of the negotiation to materialize, a bankruptcy lawyer should be consulted by Dracca because it will enable Dracca to evaluate VGV’s financial position. If VGV lacks collateral, the lawyer should consider obtaining a lien based on Dracca’s properties (Burke, & Jarkowski, 2007). Equally, if VGV has collateral, Dracca will be in a suitable position to sell the collateral and recover any debts owed. Finally, implementing a plan of action concerning the process of obtaining a lien on should follow immediate. Payment priorities will depend on the nature of the loan (secured or unsecured loan).
Burke, T. P., & Jarkowski, H. M. (2007). Insider trading. Journal of Investment
Compliance, 8 (1):16 – 21
Hazen, T. L. (2003). Federal Securities Law. Federal Judicial Centre
Loss, L. & Seligman, J. (2004). Fundamentals of Securities Regulation. Aspen
McInish, T. H., Frino, A., and Sensenbrenner, S. (2011). Strategic illegal insider trading
prior to price sensitive announcements. Journal of Financial Crime, 18 (3):247 –
The Securities Act of 1933
The Securities Exchange Act of 1934