Identification of Key Player and Role
Regarding the case study at hand, the main player comprises the organization, Texas Gulf Sulphur (TGS). The organization, which is actually a mining firm as well as the global supplier of the said mineral, engaged in an exploration scheme that facilitated considerable participation in insider trading schemes upon discovery of copper ore within the Canadian Shield, which was a mineral-rich area located near Timmins. With the information concerning the mineral resources within the respective site, the organization stopped the drilling processes for a specified timeline in order to attain the land surrounding the site. During the respective period, employees, company officials, and tippees bought stock within the open market. However, the purchase of the stock options by the respective individuals was not disclosed to the public. The action of the organization in deterring from disclosing the possibly considerable mineral discovery to the public delved it profoundly in allegations regarding illegal investor relations.
Consequently, after anecdotes regarding the discovery were concentrated on considerably by the media, the company carried out a press release, which stated that the information surrounding the discovery of copper ore was exaggerated. Consequently, within the next couple of days, employees, company officials, and tippees established more stock purchases prior to the disclosure of the fact that a substantial amount of copper had been discovered by the mining company to the investing community. In this respect, the organization assumed a role in conducting unethical investor relations by avoiding transparency particularly in connection to its investors. In addition, the engagement in stock purchases by the company’s officials and employees while asserting confidentiality of the information illustrated common examples of insider trading practices, which are illegal in relation to the provisions enacted by the United States Securities and Exchange Commission.
Identification of the Main Problem
The main problem evident in this case comprised insider trading. Even though TGS was aware of the possibility that could arise from mining the specified area in terms of striking the copper ore, the respective information was kept confidential and ceased from being released to investors or the general public. Despite this, evidence of insider trading was illustrated by the purchase of stock options by employees, officers, and personnel closely associated with the organization. Regardless of the supposed confidentiality of the mining information, the workers, officials, as well as those with close ties to TGS engaged in the buying of shares within the organization.
The refusal to disseminate the valid information to the investing community further set the unethical setting for the company in terms of investor relations. Establishing confidentiality of such pertinent information clearly flouts the rules and regulations governing relations among investors and their respective companies (Bainbridge 33). Moreover, with TGS accused of insider trading, the company stood to face considerable negative reputation due to its inclinations towards confidentiality as well as the utilization of propaganda via the press in order to mask the truth. As such, the company was in possible violation of the rules enacted by the SEC concerning insider trading. However, the issue in play was based specifically on the release date of the information by the press. Accordingly, was the confidential information with which the employees, officers, and personnel closely associated with the organization used in order to but TGS stock sufficient to submit it as insider trading? Such questions clearly seem to pave way for evaluations on the disclosures of possible investor information by publicly traded organizations.
Possible Solutions and Alternatives
With reference to policies guiding on insider trading, it is possible to assert that the parties involved in the purchase of TGS stock were guilty of the practice. Indeed, a rational individual would assume that the information pertaining to the discovery of the mineral was pertinent to the price of the shares. However, for purposes of recommendation, the suspected party can argue that the information poised significant uncertainty. Hence, with that, the organization has the right of keeping the information confidential in order to avoid misleading the public. Nonetheless, this reason is not significant enough to warrant the actions committed by the company. Indeed, the information was sufficient for the shareholders. However, the workers, officials, as well as those with close ties to TGS traded explicitly on this basis. As such, their actions comprise insider trading. Furthermore, there is considerable evidence to show that TGS engaged in insider trading practices. Foremost, the company officials and employees bought the shares. Secondly, the involved personnel intentionally kept back the information from other people by using the internal communication channels as well as public conduits of relaying information such as the press. Lastly, the culprits bought the shares and stock options in the timeline where the said information was not open to the public. In this case, the main solution that the organization could undertake prior to its insider trading exposure involves disclosure of the information to the public (Barnes 98). Upon possible discovery of minerals, TGS should have relayed the information to its stakeholders as well as its shareholders. Another solution would have been for the involved personnel to wait until the respective information was satisfactorily public. Hence, in this instance, the employees, officers, and personnel closely associated with the organization could engage in the purchase of shares legally since the public would have gained a sensible prospect of acting upon the contents of the data.
Bainbridge, Stephen M. Insider Trading. Cheltenham: Edward Elgar Pub, 2011. Print.
Barnes, Paul. Stock Market Efficiency, Insider Dealing and Market Abuse. Farnham: Gower, 2009. Print.
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