Securities Law Essay

Open, View, and/or
Download this Document

Total Length: 1313 words ( 4 double-spaced pages)

Total Sources: 3

Page 1 of 4

Corporation Transactions and Misrepresentation of Financial Reports

Business law also called commercial law is a branch of civil law that governs business as well as, commercial transactions, and deals with both the private and public law. The branch created to ensure that, they are no exploitation and manipulation of people as well as rules and regulation in order to benefit some members of a business. This means that should one break or manipulate the rules and regulation in his favor. The or she must face the court in accordance with the law. With legal rights of all investors considered as an important element of the business law, we examine the board changes within the filling of the shareholder derivative lawsuits and might not be frivolous. Also, lack of highly competent employees within a business can lead to tremendous losses and to some extent closure of the business in accordance with law, due to the loss incurred. This is due to unethical factors arising due to misrepresentation of financial position of the company.

Introduction

Legal wise, protection of shareholders' rights is considered as an important element of business law and governance (Shleifer & Vishny, 1997). Therefore, the law allows the shareholders to bring lawsuits against managers or directors, when they realize that managers have exploited or manipulated their position of control inappropriately. There are proper rules and regulations set aside to dealing with issues of lawsuits (Beck & Bhagat, 1997). Also, there is enough evidence of business or corporative governance changing in certain lawsuits (Jones & Weingram, 1996).

Financial misrepresentation is the failure to provide accurate and correct portrait of financial position of a company. This is against the business law (Jensens, 2004). Since all have different cultures with values and ethics, it is unethical for a company not to provide clear financial position, and this affect the company's stakeholders.

Cases

A case where Modell owned 80% of Cleveland stadium, 53% of Cleveland Brown Football Company and Gries own 43% of Brown.

Stuck Writing Your "Securities Law" Essay?

View All Our Example Securities Law Essay

Have A Custom Example Essay Written

Browns board consisted of Modell, the outside lawyer of both company, three individuals employed by both Corporation and Gries. Modell propose that Browns buys the stadium for $6 million and Gries objects saying that that stadium appraised for only $2 million. The Brown board approves the purchase by all directors other than Gries voting in favor. Gries commenced shareholders derivative suit seeking to rescind the purchase.

Modell won the case. This is because the corporate governance indicates that directors owe a fiduciary duty to their corporation as well as to the shareholders (Fletcher, 1965). However, the, a director does not owe a fiduciary duty the rest of shareholders of the terms of directors to the third party. Even in cases, where the director may be paid more per share than the rest of shareholders (Tyron, 1995).

As a director dealing with corporation, one must be fair enough, open as well as honest. This is because directors showing personal interest in the Corporation transaction is said to be dishonest and unfair. In a case, Modell do not show personal interest when proposing the purchase, despite owning 80% of the company. And even the other directors who vote in his favor do not have a personal interest too. This fact makes him win the case, since Modell discloses all the facts about the purchase taking no advantage of his position, dealing fairly and openly to show the benefits to the company.

The transaction was fair, open, and the corporation was willing to take the opportunity. This is evidence by the fact that majority voted in Modell favor, without personal interest. The court also had it is own ways to examine fairness, honesty and personal interest at large in order to rule the case.

A Fortune 500 CFO admits to having treated $4 billion in operating expenses as assets, hence showing profit instead of loss. The stock drops by 95% and bond covenant related.....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


Related Essays

The Enron Trial and Kenneth Lay and Jeffrey Skilling

wide-ranging scheme to defraud through misleading public representation and falsified financial results. The commission identified violation of federal securities laws including the Securities Exchange Act of 1934 - Section 10(b), the Securities Act of 1933 - Section 17(a); and the Exchange Act -  Sections 13(a), and 13(b)(2)(A) and (B). The Securities Exchange Act (1933) governs companies issuance of securities while the Securities Exchange Act of 1934 governs the sale, purchase, and trading of securities (SEC 2004). The Securities Exchange Act of 1934 - Section 10(b) provides anti-fraud regulations to deter deceptive and manipulative practices in the stock market. "Rule 10b-5: Employment of Manipulative and Deceptive Practices” is the… Continue Reading...

Cardillo Travel Systems

of the company's registration (SEC, 2014). Violating the insider trading provisions of the federal securities laws The executives of Cardillo were in violation of insider trading provisions, owing to the fact that they made a shareholder equity transaction through the issuing of 100,000 shares of the company's stock, with the excuse of obscuring for the substantial financial penalties charged by the court. The SEC's actions are rationalized as this undertaking was in violation of section 10b-5 of the Securities and Exchange Act. Rule 10b5-1 provides that an individual trades on the basis of material nonpublic information if a trader is aware of the material… Continue Reading...

sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Securities Law" (2012, June 02) Retrieved April 28, 2024, from
https://www.aceyourpaper.com/essays/securities-law-111168

Latest MLA Format (8th edition)

Copy Reference
"Securities Law" 02 June 2012. Web.28 April. 2024. <
https://www.aceyourpaper.com/essays/securities-law-111168>

Latest Chicago Format (16th edition)

Copy Reference
"Securities Law", 02 June 2012, Accessed.28 April. 2024,
https://www.aceyourpaper.com/essays/securities-law-111168
   

Open, View, and/or
Download this Document
order custom essay example