Background In the fall of 2008, the Securities and Exchange Commission (SEC) levied civil charges against NBA team owner Mark Cuban for alleged insider trading The charges stemmed from trades Cuban made related to a small internet search company (Mamma com) Prior to his trades, Cuban was informed by the companys CEO that they were planning to do a secondary equity offering in the near future and that they would like for him to buy some additional shares of the company Knowing that the offering would (at least temporarily) depress Mamma coms stock price, Cuban refused and instead began immediately selling his 6 3 stake of the company The following day, shares of Mamma com opened approximately 10 lower Because Cuban successfully sold all of his shares, he was able to avoid losing any money Facts about the case Applicable facts (assumptions are noted as such) surrounding the case include the following Mark Cuban was a significant shareholder of the internet company Mamma com The CEO of Mamma com informed Cuban that they were planning to undertake a secondary equity offering prior to informing the public (e g , Cuban was privy to material nonpublic information) After learning of the planned secondary equity offering, Cuban immediately sold his entire stake in the company Had the secondary offering been completed, the total market value of Cubans position would have decreased (assumption) Cuban was solely responsible for the large, single day decrease in Mamma coms stock price (assumption) Assume the United States decided to repeal laws prohibiting insider trading and Mark Cuban did not have to worry about breaking any laws by trading Mamma coms stock What is the major ethical issue Who are the stakeholders In other words, who would be affected directly or indirectly by Mark Cubans decision of how to handle this ethical issue List at list 3 stakeholders How would they be affected by the ethical decision Still hypothetically assuming the US does not have insider trading laws, what do you think would be the impact if insider trading became common Do you think the US should or should not have insider trading laws

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Posted on Aug 04, 2024

Background In the fall of 2008, the Securities and Exchange Commission (SEC) levied civil charges against NBA team owner Mark Cuban for alleged insider trading.

Background

In the fall of 2008, the Securities and Exchange Commission (SEC) levied civil charges against NBA team owner Mark Cuban for alleged insider trading. The charges stemmed from trades Cuban made related to a small internet search company (Mamma.com). Prior to his trades, Cuban was informed by the companys CEO that they were planning to do a secondary equity offering in the near future and that they would like for him to buy some additional shares of the company. Knowing that the offering would (at least temporarily) depress Mamma.coms stock price, Cuban refused and instead began immediately selling his 6.3% stake of the company. The following day, shares of Mamma.com opened approximately 10% lower. Because Cuban successfully sold all of his shares, he was able to avoid losing any money.

Facts about the case

Applicable facts (assumptions are noted as such) surrounding the case include the following:

Mark Cuban was a significant shareholder of the internet company Mamma.com.
The CEO of Mamma.com informed Cuban that they were planning to undertake a secondary equity offering prior to informing the public (e.g., Cuban was privy to material nonpublic information).
After learning of the planned secondary equity offering, Cuban immediately sold his entire stake in the company.
Had the secondary offering been completed, the total market value of Cubans position would have decreased (assumption).
Cuban was solely responsible for the large, single-day decrease in Mamma.coms stock price (assumption).

Assume the United States decided to repeal laws prohibiting insider trading and Mark Cuban did not have to worry about breaking any laws by trading Mamma.coms stock. What is the major ethical issue?
Who are the stakeholders? In other words, who would be affected directly or indirectly by Mark Cubans decision of how to handle this ethical issue? List at list 3 stakeholders. How would they be affected by the ethical decision?
Still hypothetically assuming the US does not have insider trading laws, what do you think would be the impact if insider trading became common? Do you think the US should or should not have insider trading laws?