Explain The Section 16 Rule Of The Securities And Exchange Act Of 1934

It is important to regulate the interactions among directors, officers, and shareholders within a corporation in order to prevent security fraud.

In this paper the main focus will be on the clause of 'Liability to contemporaneous traders for insider trading' which is section 20A in the Securities Exchange Act of 1934. The paper will start off by giving some basic points that make up this section followed by the history and background of the Securities Exchange Act of 1934. The paper will then highlight the major impact that this act has made on the industry in the current global standing. Some of the basic points that make up the subsection 20A clauses include the following:

The Securities Exchange Act of 1934 was passed by congress to strengthen the government’s control of the financial markets. It was preceded by the Securities Exchange Act of 1933 which was enacted during the Great Depression in hopes that the stock market crash of 1929 would not be repeated. The basic difference between the two acts was that the 1933 Act was to govern the original sales of securities by requiring that the issuers, the companies offering the securities, offer up sufficient information about themselves and the securities so that the potential buyers could make informed decisions. The 1934 Act was

The stock market is the market where shares of publicly owned companies are issued through exchanges or over-the-counter markets. Some individuals, such as R. Foster Winans, will attempt to cheat the stock market and make profits illegally through insider trading. Insider trading is an illegal activity where people will trade stocks based on confidential information. R. Foster Winans was charged with insider trading because of his knowledge of what would appear in the Wall Street Journal’s, “Heard on the Street Column.” R. Foster Winans got the punishment he deserved for insider trading on the stock market.

The Act of 1934 focuses on the markets, such as, the securities, stock exchange and the individuals participating in these markets, by determining the laws that regulate them. This Act protects investors from fraud, giving transparency into companies, and preventing individuals from taking advantage of information others may not have; in the secondary markets. The Securities Act of 1934, also created the Securities and Exchange Commission, which regulates the security markets.

Rule 10B-5 was created under the Securities Exchange Act of 1934. It is a regulation known as the Employment of Manipulative and Deceptive Practices that states that it is not legal to make any false statement of material fact with scienter or leave out any material facts that would cause the statement to be misleading in concert with the purchase or sale of any

In addition to the thorough explanation about the fundamental concepts of insider dealings, the law also provides detailed statements about some common scenarios of insider dealings which are not regarded as market misconduct, interest in securities, penalties and general defenses.

In economic society, most people like to invest their fortunes in the capital market and security market. As more and more investors join in the investing market which is very complex and fascinating, and it can be successful. Unlike the deposits are hypothecated by the federal government, stocks, bonds and other securities can lose value in capital market because their no surety. So the security and exchange commission play an important role in the capital market, and the important thing is the security and exchange commission demands the public companies should be disclose the meaningful financial and other information to the public. This provides an equitable environment and common knowledge

Where, upon the commencement of this Act, neither the memorandum nor articles of a company that is a private company by virtue of paragraph (a) of the definition of ‘private company’ in subsection 4(1) contain the restrictions, limitations and prohibitions required by subsection (1) to be included in the memorandum or articles of a company that may be incorporated as a private company, the articles of the company shall be deemed to include each such restriction, limitation or prohibition that is not so included and a restriction on the right to

Reese, William, Jr., and Michael Weisbach. "Protection of Minority Shareholder Interests, Cross-listings in the United States, and Subsequent Equity Offerings." NBER. Journal of Financial Economics, 2002. Web. 20 Jan. 2013.

Insider trading refers to the trading of a listed company’s stock or other financial securities by individuals who has access to non-public material information about the company. This action often occurs within employees/ex-employees of the listen company. Information is considered to be non-public material information if making it public would affect the price of securities, and using such information in decisions to buy or sell financial securities would be unfair to non-insiders (Bainbridge, 2013). Insider trading is treated as a mischief in more than 90 countries, and defendants are imposed with penalties (Beny, 2012). Specific insider conduct regulations in New Zealand were first enacted in 1988, followed by amendments in 2002, 2006 and 2008. The insider conduct regimes between 1988 and 2008 are often considered as a failure due to weak enforcements. Thus in 2008, the regulator introduced a new regime, which was a close model to the Australian insider conduct legislation. Both regimes are expansive, meaning it could be applied to any person in possession of insider information. However, while the Australian laws were aggressively enforced (more than 26 prosecutions were brought since then), no prosecutions have been launched under the new legislation in New Zealand. In addition, New Zealand also had no convictions secured prior to 2008, illustrating a clear enforcement deficit in the New Zealand

Most popular Rule 10b-5 promulgated by the SEC (Securities and Exchange Commission) pursuant to the authority granted it by Section 10(b) of the Securities Exchange Act, although insider trading prohibition technically is grounded in the federal securities regulation statutes now. The SEC adopted new rules which named 10b5-1 and 10b5-2 to resolve two insiders trading issues where the courts have disagreed. Rule 10b5-1 provides that a person trades on the basis of material nonpublic information if a trader is "aware" of the material non public information when making the purchase or sale. Meanwhile, Rule 10b5-2 explains how the misappropriation theory applies where in rule provides that a person receiving confidential information under circumstances specified in the rule would owe a duty of trust or confidence and thus could be liable under this theory.

The section says that at some time before the organization entered insolvent liquidation there will have been a point where the directors knew it was wrong and the corporation could not trade out of the circumstance. The sensible director would stop at this point continue trading. If he still continues to trade he risks having to contribute to the debts of the company under

Each Party shall accord to investors of another Party, and to covered investments, in relation to the establishment, acquisition, expansion, management, conduct, operation, liquidation, sale, transfer or other disposition of investments, treatment no less favourable than that it accords, in like circumstances, to its own investors and their investments.

ICICI bank ensures that its employees do not get involved in any insider trading activities. To protect the integrity of the group and its subsidies ICICI bank makes sure that it does not support or involve in any kind of insider trading. It makes sure that non-public information regarding trade in securities does not reach families or friends of any of its employees. ICICI bank placed the following methods to regulate the insider