Case 7: Dirks v. SEC , 463 U.S. 646 (1983). On March 6, 1973, Raymond Dirks, a s
ID: 1171129 • Letter: C
Question
Case 7: Dirks v. SEC, 463 U.S. 646 (1983).
On March 6, 1973, Raymond Dirks, a security analyst in a New York brokerage firm, received nonpublic information from Ronald Secrist, a former officer of Equity Funding of America, a seller of life insurance and mutual funds. Secrist alleged that the assets of Equity Funding were vastly overstated as the result of fraudulent corporate practices. He also stated that the SEC and state insurance departments had failed to act on similar charges of fraud made by Equity Funding employees. Secrist urged Dirks to verify the fraud and to disclose it publicly.
Dirks visited Equity Funding's headquarters in Los Angeles and interviewed several officers and employees of the corporation. The senior management denied any wrongdoing, but certain employees corroborated the charges of fraud. Dirks openly discussed the information he had obtained with a number of his clients and investors. Some of these persons sold their holdings of Equity Funding securities. Dirks urged a Wall Street Journal reporter to write a story on the fraud allegations. The reporter, fearing libel, declined to write the story.
During the two-week period in which Dirks investigated the fraud and spread the word of Secrist's charges, the price of Equity Funding stock fell from $26 per share to less than $15 per share. The New York Stock Exchange halted trading in Equity Funding stock on March 27. On that date, Dirks voluntarily presented his information on the fraud to the SEC. Only then did the SEC bring an action for fraud against Equity Funding. Shortly thereafter, California insurance authorities impounded Equity Funding's records and uncovered evidence of the fraud. On April 2, The Wall Street Journal published a front-page story based largely on information assembled by Dirks. Equity Funding immediately went into receivership. The SEC brought an administrative proceeding against Dirks for violating Rule 10b–5 by passing along confidential inside information to his clients. The SEC found that he had violated Rule 10b–5, but it merely censured him, since he had played an important role in bringing the fraud to light. Dirks appealed to the Court of Appeals, which affirmed the judgment. Dirks then appealed to the Supreme Court.
TRUE OR FALSE WITH EXPLANATION
1. Because the shares of Equity Funding traded on the New York Stock Exchange, a secondary market, Equity Funding must routinely provide its shareholders with updated information on the performance of the company in its annual report, periodic reports and proxy solicitations.
2. Secrist did not violate his duty to the corporation’s shareholders by providing information to Dirks, because, as a former officer, he no longer owes fiduciary duties to Equity Funding, and he received no monetary or personal benefit for revealing the information to Dirks.
3. As a security analyst in a New York brokerage firm, Dirks owes a fiduciary duty to his firm not to reveal the information he uncovered about Equity Funding with his clients.
4. If at the time he passed the information to Dirks, Secrist owed a fiduciary duty to Equity Funding not to reveal the information he conveyed to Dirks, Dirks ought to have realized Secrist should not do have done so and should be treated as a tippee.
5. Dirks cannot have violated Rule10b-5 unless: (a) he gained access to inside information as an Equity Funding insider, and (b) it is unfair to permit him to gain benefits from that information without disclosing it.
1. Because the shares of Equity Funding traded on the New York Stock Exchange, a secondary market, Equity Funding must routinely provide its shareholders with updated information on the performance of the company in its annual report, periodic reports and proxy solicitations.
2. Secrist did not violate his duty to the corporation’s shareholders by providing information to Dirks, because, as a former officer, he no longer owes fiduciary duties to Equity Funding, and he received no monetary or personal benefit for revealing the information to Dirks.
3. As a security analyst in a New York brokerage firm, Dirks owes a fiduciary duty to his firm not to reveal the information he uncovered about Equity Funding with his clients.
4. If at the time he passed the information to Dirks, Secrist owed a fiduciary duty to Equity Funding not to reveal the information he conveyed to Dirks, Dirks ought to have realized Secrist should not do have done so and should be treated as a tippee.
5. Dirks cannot have violated Rule10b-5 unless: (a) he gained access to inside information as an Equity Funding insider, and (b) it is unfair to permit him to gain benefits from that information without disclosing it.
Explanation / Answer
No Secrist did not violate his duty to the corporations shareholders by providing information to Dirks, because, as a former officer but the reason is fair working and also the social responsibility if secrist can receive personal or monetary benefits for revealing the information it is also guilty for soliciting the investors and earning personal benefits due to unfair or inducing
Here Dirks is false because his action of fiduciary duty to his firm not to reveal the information he uncovered about Equity Funding with his clients is unfair. Here Dirks work to give fair and true view of data to shareholders don’t try to solicit these investors of their firm
It is False because the action taken by Secrist is true here it is need to change the working or thinking of Dirks for Fraudulent Acts If Secrist owed a fiduciary duty to Equity Funding not to reveal the information he conveyed to Dirks, Dirks ought to have realized Secrist should not do have done so and should be treated as a tippee. and after that Dirks Try to made everything correct and give a fair view of data and information to all
Here Dirks Is doing wrong he is false insider trading is very unlawful act There are many laws created due to the action of insider trading And second one is true that is is unfair to permit him to personal benefits because personal benefits made also guilty Secrist for inducing or soliciting investors
1. Because the shares of Equity Funding traded on the New York Stock Exchange, a secondary market, Equity Funding must routinely provide its shareholders with updated information on the performance of the company in its annual report, periodic reports and proxy solicitations. Yes it is true because there are some government regulations or requirements which are to be made for the protection of investors here the shares are traded in the secondary market and the shares are overvalued while the value of share is low due to fraud now the updated information in the annual reports and periodic reports is to be given for true and fair representation 2. Secrist did not violate his duty to the corporation’s shareholders by providing information to Dirks, because, as a former officer, he no longer owes fiduciary duties to Equity Funding, and he received no monetary or personal benefit for revealing the information to Dirks.No Secrist did not violate his duty to the corporations shareholders by providing information to Dirks, because, as a former officer but the reason is fair working and also the social responsibility if secrist can receive personal or monetary benefits for revealing the information it is also guilty for soliciting the investors and earning personal benefits due to unfair or inducing
3. As a security analyst in a New York brokerage firm, Dirks owes a fiduciary duty to his firm not to reveal the information he uncovered about Equity Funding with his clients.Here Dirks is false because his action of fiduciary duty to his firm not to reveal the information he uncovered about Equity Funding with his clients is unfair. Here Dirks work to give fair and true view of data to shareholders don’t try to solicit these investors of their firm
4. If at the time he passed the information to Dirks, Secrist owed a fiduciary duty to Equity Funding not to reveal the information he conveyed to Dirks, Dirks ought to have realized Secrist should not do have done so and should be treated as a tippee.It is False because the action taken by Secrist is true here it is need to change the working or thinking of Dirks for Fraudulent Acts If Secrist owed a fiduciary duty to Equity Funding not to reveal the information he conveyed to Dirks, Dirks ought to have realized Secrist should not do have done so and should be treated as a tippee. and after that Dirks Try to made everything correct and give a fair view of data and information to all
5. Dirks cannot have violated Rule10b-5 unless: (a) he gained access to inside information as an Equity Funding insider, and (b) it is unfair to permit him to gain benefits from that information without disclosing it.Here Dirks Is doing wrong he is false insider trading is very unlawful act There are many laws created due to the action of insider trading And second one is true that is is unfair to permit him to personal benefits because personal benefits made also guilty Secrist for inducing or soliciting investors
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