Lou Hoskins is the CFO of Gold Coast Mining Corporation. Preliminary analysis of
ID: 2332694 • Letter: L
Question
Lou Hoskins is the CFO of Gold Coast Mining Corporation. Preliminary analysis of the current quarter's financial statements shows a significant decrease in the company's profitability. Lou owns a significant amount of Gold Coast Mining Corporation's stock and is afraid that the value of the stock will decrease after the financial statements are released to the public. In an effort to mitigate his losses, Lou sells half of his stock before the statements are released to the public.
1. Discuss whether or not Lou's actions are ethical.
2. Are there any potential consequences to Lou's actions; and, if so, who would be affected by these consequences?
(IN YOUR OWN WORDS)
Explanation / Answer
Answer:
(1). This action is absolutely illegal. In the event that any organization official, administrator, executive and officer and so forth make enormous purchasing and offering the load of the organization based on the private data which isn't uncovered in general society, at that point doing as such is completely turned into the instance of insider exchanging and consequently it is unlawful.
(2). Such actions advance wastefulness and out of line rivalry in the market and influences speculators certainty and enthusiasm for the share trading system. According to morals and additionally laws, the chief, officer or official can't make such ventures by abusing private data which they have just got ahead of time.
According to SEC rules, if the exchanges are made with insinuation to the SEC then it is legitimate else it is illicit and exploitative as well.
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