Please provide your written analysis for the questions 1-4 below. The required c

Question

Please provide your written analysis for the questions 1-4 below.

The required components for each question include:

Title page

Issue for Questions 1-4

The Applicable Rules for Questions 1-4

The Application of the Rules for Questions 1-4 to the fact pattern in Questions 1-4

The Conclusion (the answer to the question asked in Questions 1-4)

References

APA Format

This method is called the "IRAC" analysis. For this assignment you will need to have 1 title page and 1 reference page. Please note that for each question you will need to provide a separate "IRAC" Analysis. Please provide a separate heading for each question (ie. Question 1 IRAC). Make sure that you include the Issue, Rule, Application of the Rule and the Conclusion for each question. Also make sure that you label them so that I know when you are discussion the Issue, Rule, Application of the Rule, and the Conclusion for each question. Incomplete analysis of questions will result in a deduction of points.

Due Sunday Night at Midnight

1. Glen is a director and shareholder of Eagle Corporation and of Fine Products, Inc. A resolution comes before the Eagle board to compete with Fine Products. What is Glen’s responsibility?

2. Todd is a director and officer of United Sales, Inc. Todd makes a market­ing decision that results in a dramatic decrease in profits for United and its shareholders. The shareholders accuse Todd of breaching his fiduci­ary duty to the corporation. What is Todd’s best defense against this ac­cu­sation? Later, a resolution comes before the United board to compete with VeriFine Products, Inc. Todd is a director and shareholder of VeriFine. What is Todd’s responsibility in this situation?

3. Drew is an officer of Energy Fuel, Inc. Drew knows that an Energy engi­neer recently developed a new, inexpensive method for converting hy­dro­gen into fuel. Drew takes advantage of this information to buy Energy stock from Gert and, after the discovery is announced, to sell the stock to Holly at a profit. Gert claims that this is a violation of federal law. Is Gert correct? If so, what federal law has Drew violated? If not, has Drew vio­lated any law?

4. Standard Corporation is a public company whose shares are traded in public securities markets. Standard’s officers want to set up and main­tain a system of “good corporate governance.” What is “ corporate govern­ance”? What is its practical significance? What, at a minimum, should a “good” system of corporate governance include?

Explanation / Answer

Answer 4.

What is "corporate governance"?

A: "Corporate governance" is "an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity, accountability and integrity. (O'Donovan, A Board Culture of Corporate Governance, Vol 6 Issue 3 (2003).

What is its practical significance?

A: Evidence suggests that:

However, Government has always been loath to regulate corporations until after they have injured their shareholders and the public, and there is little money left with which to compensate injured parties. The reason why this system has proliferated and even prospered, is because it is the economic equivalent of organic natural selection, and the brutal manner with which corporations are operated, tends to leave only the most extraordinarily financially healthy organizations "standing."

What, at a minimum, should a "good" system of corporate governance include?

Answer 3)

FACTS:

1. Drew is an officer of Energy Fuel, Inc.

2. Drew knows that an Energy engi­neer recently developed a new, inexpensive method for converting hy­dro­gen into fuel.

3. Drew takes advantage of this information to buy Energy stock from Gert and, after the discovery is announced, to sell the stock to Holly at a profit.

ISSUE

Gert claims that Drew has violated federal law as he has knowledge of private information.

RULE

Yes, assuming that Gert did not know about the engineer’s invention before it became public knowledge, Gert is correct.

Under Securities Exchange Commission Rule 10b-5, it is unlawful for any person to use an instrumentality of interstate commerce to defraud or manipulate in connection with the purchase or sale of securities

Drew's purchase of his organization's stock while an officer of the organization, and based upon inside information not available to the general public is a violation of Rule 10b-5, which exposes Drew to liability in the amount of any profit made as a result of his illegal transaction -- as well as additional civil penalties to the government

APPLY

To establish a claim under Rule 10b-5, plaintiffs (including the SEC) must show (i) Manipulation or Deception (through misrepresentation and/or omission) Drew Knew about the new invention that would affect the stock prices.; (ii) Materiality; The information that Drew hide was material to the stock concerned. (iii) "In Connection With" the purchase or sale of securities, and (iv) Scienter. Private plaintiffs have the additional burden of establishing (v) Standing - Purchaser/Seller Requirement; (vi) Reliance (presumed if there was an omission); (vii) Loss Causation; and (viii) Damages Gert lost the profits he might have made had he not sold the stock to Drew.

HoweverTo what extent Rule 10b-5 prohibits insider trading is a matter of some dispute. The SEC has long advocated an "equal access theory" with regard to 10b-5, arguing that anyone who has material, non-public information must either disclose that information or abstain from trading. However, the Supreme Court rejected the strongest version of that theory in Chiarella v. United States holding a person with no fiduciary duty to the shareholders had no duty to disclose information before trading on it. In 1997, the Supreme Court has embraced a "misappropriation" theory of omissions, holding in United States v. O'Hagan[4] that misappropriating confidential information for securities trading purposes, in breach of a duty owed to the source of that information, gives rise to a duty to disclose or abstain.

CONCLUSION

Drew has been involved in insider trading and Gert can enforce the requirements of law through lawsuit.

Answer2.

FACTS
Todd is a director and officer of United Sales, Inc.

Todd’s decision results in a dramatic decrease in profits for United and its shareholders.

The shareholders accuse Todd of breaching his fiduci­ary duty to the corporation.

Todd is a director and shareholder of VeriFine.United board has decide to compete with VeriFine Products, Inc.

ISSUE

The shareholders accuse Todd of breaching his fiduci­ary duty to the corporation. Todd is a director and shareholder of VeriFine and United board has to take decision on to compete with VeriFine Products, Inc.

RULE

A director cannot support a business that competes directly with a corporation on the board of which the director sits.

APPLY

The director’s fiduciary duty requires him to fully disclose the conflict of interest. Most likely, the director in these circumstances will have to resign from one of the boards. Todd have to resign from the board of United or VeriFine.

CONCLUSION

What is Todd’s best defense against this ac­cu­sation? Later, a resolution comes before the United board to compete with VeriFine Products, Inc. Todd is a director and shareholder of VeriFine. What is Todd’s responsibility in this situation?

The best defense in this context is the business judgment rule. As long as a director would use in similar circumstances, he or she is not liable simply because a decision has a negative result officer does what is necessary to be informed,and acts in good faith, in what he or she considers to be the best interests of the corporation, and with the care that an ordinarily prudent person would use in similar circumstances, he or she is not liable simply because a decision has a negative result. Also, Todd would have to resign from the Board of either United or Verifine.

Answer 1.

FACT

Glen is a director and shareholder of Eagle Corporation and of Fine Products, Inc.

A resolution comes before the Eagle board to compete with Fine Products.

ISSUE

A director cannot support a business that competes directly with a corporation on the board of which the director sits. It is a conflict of interest.

RULE

The director’s fiduciary duty requires him to fully disclose the conflict of interest.

APPLY

A director cannot support a business that competes directly with a corporation on the board of which the director sits. The director’s fiduciary duty requires him to fully disclose the conflict of interest.

CONCLUSION
Glen cannot serve on the board of both Eagle and Fine products when they are competing with each other. It’s his responsibility that he discloses this conflict of interest and resigns from the board of one of the companies.

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