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Legal Issues and Ethical Issues Questions

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Business

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Question 1 What you think the result of the appeal was in SEC v. McGee. What are the

legal issues and was McGee’s actions ethical issues?

The result of the appeal in SEC vs. McGee was fair to the parties since it sustained the legal

questions addressed by FINRA. The legal issues considered in this appeal were;

a) Commission of fraud when CF was induced to liquidate her variable annuities to purchase a

54Freedom charitable gift annuity without disclosing compensation from 54Freedom. Exchange

Act Section 10(b) and Rule 10b-5 there are under and FINRA Rules 2020 and 2010. A

respondent violates Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5 when,

linking it with the buying or sale of a security, and acting with scienter, he omits a material fact

despite a duty to speak.13

b) The unsuitable recommendation that CF surrenders her variable annuities and purchases a 54

FREEDOM charitable gift annuity.

McGee was found to have violated NASD Rule 2310 and NASD IM-2310-2—the customer

suitability rules—and FINRA Rule 2010. NASD IM-2310-2 states that “the fundamental

responsibility for fair dealing” is implicit in the relationships between customers and registered

representatives. 34 NASD Rule 2310 required that registered representatives have “rational

information considering that the validation is appropriate depending on the pieces of evidence.

McGee did not give recommendations that did not have customer-specific suitability.

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c) Engagement is undisclosed outside business activities. This is because he failed to inform

Cadaret of his full relationship with 54Freedom. FINRA Rules 3270 and 2010

d) Failure to disclose material information on his Form U4 in time. According to Section 2(c) of

Article 5 of FINRA’s By-Laws and FINRA Rules 1122 and 2010,e) Engagement in conduct that

is not consistent with Just and ethical principles of trade. This was by making false statements on

compliance questionnaires.

Question 2 Discuss the legal issues and ethical issues raised by the Martha Stewart case?

The legal issues discussed in the Martha Stewart case are;

The issue at hand here is insider trading, and the question is, in what instances is it legal

or illegal? Insider trading refers to the purchase and sales of securities by an individual who has

obtained non-public material information and by having special knowledge is being partial to

other investors who do not have access to the same.

Martha did this with the intention of avoiding imminent losses without considering the

plight of the other shareholders who didn’t have this nonpublic information. This was in

Violation of Section17 Rule 10 (b) (5) of the Securities and Exchange Commission’s Act. Inside

trading here was seen as illegal since Martha also intentionally used inside trading to defraud,

obtain money by use of untrue statements, against the law, and attempts to obstruct justice using

Peter Banacovic, his broker. By not following the code we can say she didn’t employ elements of

business ethics like being truthful, honest, and just she ignored essential principles of business

ethics like good and evil, right and wrong actions in business. It is important to note that law and

ethics in business are overlapping and coexistent

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Surname 1 Student’s name Professor’s Name Course Date Question 1 What you think the result of the appeal was in SEC v. McGee. What are the legal issues and was McGee’s actions ethical issues? The result of the appeal in SEC vs. McGee was fair to the parties since it sustained the legal questions addressed by FINRA. The legal issues considered in this appeal were; a) Commission of fraud when CF was induced to liquidate her variable annuities to purchase a 54Freedom charitable gift annuity without disclosing compensation from 54Freedom. Exchange Act Section 10(b) and Rule 10b-5 there are under and FINRA Rules 2020 and 2010. A respondent violates Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5 when, linking it with the buying or sale of a security, and acting with scienter, he omits a material fact despite a duty to speak.13 b) The unsuitable recommendation that CF surre ...
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Tags: ethical issues legal issues Martha Stewart imminent losses Peter Banacovic