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    Trading Case Study Help

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    Trading Case Study Help


    Trading Case Study Help

    Are information-gathering techniques like Rajaratnam’s common on Wall Street? If so, what would regulators, investors, and executives do to reduce the practice?

    It is very common way to collect information in Wall Street which was followed by Rajaratnam. According to Hinckley et al. (2012, p. 1895), people often invest on the fake analyst in the meeting or shocked people in order to collect information. Rajaratnam also follow the same process to collect information. This is the common feature of the insider trading. Insider business depends on the non-public information. Hence, this is considered as an illegal and unethical practice.

    In order to control and reduce the practise of insider trading regulators should take firm steps. The government should prevent such trading by monitoring the business activities in the market. Regulators should monitors related factors such as announcement, materials and such others that put impact on the change of price of shares and stocks. Monitoring could allow the regulators to point out the illegal trades or investigate such activities to control those illegal activities. Such surveillance could restrict even Rajaratnam from his illegal activities. All the people in Wall Street are intending to make money. Hence chances of illegal activities are too much on such scenario. Non-public information often exchanges there for huge money that certainly drops the ethical value of the business. Such information exchanges through the financial officers, executive and analyst. Even investors encourage such practices. This could make a great profit for an investor for certain money and they also invest on the employees and such other sources. Case of Rajaratnam suggests implication of such techniques to gather information. The verdict of the Rajaratnam case depicts that insider trading is illegal practice and it should be regulated. In order to reduce such practice, government and regulators are required to supervise. Stock Exchange Act of 1934, section 10b of US government depicts that the insiders are liable for breaching of fiduciary duty regarding the source of information (law.cornell.edu 2016). Investors should follow the ethics to maintain the principle of business. They should restrict such investment to gather illegal information which will help to restrict such practice. They have a certain role to maintain the social principles. Ethical value of those investors could help to regulate the illegal practice of insider trading. Executives are also very important factors in the practice of insider trading. They offer information that is the main base of this practice. Hence, they are required to hold related information. If they do not offer such information, chances for inside trading will be reduced by a huge margin. Hence, both the regulators, executives and investors are required to follow certain ethical steps to regulate such illegal practices.

    What are the implications of sharing confidential material information?Is it something that would affect your decision about how to trade a stock if you knew about it?

    Confidential information should not be released without any permission from the related parties. Confidentiality acts as an inspiration for the investors. Holding of confidential information raises the value of the venture. It helps the organisation to increase the value of the organisation (Yang and Maxwell, 2011, p. 171). It is almost related to the ethics of the organisation. Sharing of such information allows the organisation to lose its value and reliability. Confidential information sharing could help certain people to enjoy a great profit and advantage. This could not be a solution in case of a long term business activities. Rajaratnam apply such technique of sharing of confidential information. This did not last long for him. On the other hand it reduce the value of the organisation, both the inside trader and the registered company. Confidential information has significant values regardless to the organisation. These information could change the status of the whole market as there would be certain upside down .The main principle of the stock market is the uncertainty but the mutual sharing of confidential information could cause a certainty for certain people. That could be an illegal advantage. Such information sharing could play a vital role in a particular industry or even in case of a certain market. The mutual sharing of confidential information could lead to lost of certain company from the stock market and this eliminates the uncertainty or certain investors. This could force the change of ownership of the organisation.

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    Sharing of material information also could raise the security threat for the organisation. Hence, sharing of confidential information should be considered as an important factor for the organisation. The decisions in the market are always impacted by the level of information available with someone. In this respect the usage of the confidential information by an outsider of the company surely impact the proceedings of the entity. As sharing of material information involves some sensitive information regarding the share price, investment details, they affect the trading decisions. According to Yang et al. (2011, p. 167), the implications of the sharing of material information have established that these details are helpful in successful trading in the market. As stock market is a place full of uncertainty, material details makes the dealings certain and thus surely affect trading decisions. An individual is bound to be impacted by these information. The case study established that these details are essentially impactful over the trading decisions. The clients of Rajaratnam took his help as he could supply use those material insider information in the decision making regarding the trading of shares and make profit for the clients and for himself also.

    The trading decisions in the stock market always rely on the assumptions related to the activities of the organisations. In this context, it material information is available and they make the scenario certain, then surely trading decisions will be affected. In this regard it is worth to mention that in the case study, the information shared by Rajat Gupta regarding the stock transfer of Goldman Sachs to Berkshire Hathaway made the uncertain certain. The organisation led by Rajaratnam, Galleon, took the opportunity and made huge profit of $900000 unethically. Hence it can be concluded in this regard, that such material information is obvious to impact the buying decision in the stock market.

    Do you think the secret investigation and conviction of Rajaratnam and other people in the galleon network will deter other fund managers and investors from sharing nonpublic information?

    In October, 2009 Raj Rajaratnam was charged in case of conspiracy and security fraud. Insider trading is defined as trading form, which is based on nonpublic information. Such information is showing valuable implications within the organisation. Here trading rules are incorporated with various sections of Security and Exchange Act 1934. Secret investigations and convictions are supervised under section 10b (sec.gov, 2017). It has been concluded; Raj Rajaratnam has conspired without involvement of others fraud commitment activity and sharing trade secrets. As an Executive, he has no authority to share nonpublic information based on ethical principles. Therefore, Rajaratnam should not share that information’s in gallon network. Galeon trading investigation, which will be used to convict various public matters, first uses wiretap. Unlawful insider trading is offensive at all level in order to share information (sevenpillarsinstitute.org, 2017). Therefore, federal authorities are also thinking that, such conviction will deter other managers, who are involved in insider trading. Directors shall not engage themselves with the activity on pecuniary relationship.

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    Such factors are criticised on the matter of conflict interest. Such conflicts are including representative activities of employee and directors. Relating to any transaction, they have no rights to use personal benefits. In such cases insiders are considered, who has special touch with company. They are responsible to possess material and nonpublic information about the business principles. Within the organisation, he has responsible duty to disclose entire data from public availability. Such information is related to financial results, dividend changes, governmental litigations and equity offerings. According to Securities Exchange Act of 1934, in the Rule 10b-5, insider role will be criticised within legal parameter. If major information is available to the public or other unauthorised executive, they can use it in an unethical way. Therefore, members who are involved in sharing activities will incorporate unethical movement in case of investment value. Risks are too much critical within the organisation to stable sustainable business principles. However, Rajratan has broken the legal principles of information sharing and get punishment by the court jurisdiction. It has been observed in the case, that such information is visualised as major important within business progress.

    However, after analysis of overall case study no possibility where, Rajaratnam and his associate people within the galleon network can deter other investor and fund manager in response to sharing of nonpublic information. In this case, some will always present, who can modify the overall system with advanced technologies (sevenpillarsinstitute.org, 2017). They will think outsmart technologies can enhance the ability of hiding the information. There are extreme number of fraud related to insider trade is increasing rapidly. Among them many insider individual will try to sort out suspicious person with sincere attention. Insiders will also assess their own circle members under the suspicion process. However, such kind of movement will not deter any infractions within occur situation. It will deter the nature where infractions are to be executed.  

    References

    Hinckley, K., Bi, X., Pahud, M. and Buxton, B., 2012, May. Informal information gathering techniques for active reading. In Proceedings of the SIGCHI Conference on Human Factors in Computing Systems (pp. 1893-1896).ACM.

    Yang, T.M. and Maxwell, T.A., 2011. Information-sharing in public organizations: A literature review of interpersonal, intra-organizational and inter-organizational success factors. Government Information Quarterly, 28(2), pp.164-175.

    Yang, T.M. and Maxwell, T.A., 2011. Information-sharing in public organizations: A literature review of interpersonal, intra-organizational and inter-organizational success factors. Government Information Quarterly, 28(2), pp.164-175.

    law.cornell.edu (2016) Stock and Exchange Act Available At: https://www.law.cornell.edu/wex/securities_exchange_act_of_1934 [Accessed On: 21st Sept, 2017] sevenpillarsinstitute.org (2017) Rajrajaratnam and insider trading Available at : http://sevenpillarsinstitute.org/case-studies/raj-rajaratnam-and-insider-trading-2 [Accessed on 21 sep,2017] sec.gov (2017) US security Exchange Available at: https://www.sec.gov/fast-answers/answersinsiderhtm.html [Accessed on 21 sep, 2017]

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