BLAW 200

Investor Protection and Corporate Governance

Dale Emerson served as the chief financial officer of Reliant Electric Company, a distributor of electricity serving Montana and North Dakota. Reliant was in the final stages of planning a takeover of Dakota Gasworks, a natural gas distributor that operated solely within North Dakota. Emerson went on a weekend fishing trip with his uncle Ernest Wallace. Emerson mentioned to Wallace that he had been putting in a lot of extra hours at the office planning a takeover of Dakota Gasworks When he returned from the fishing trip, Wallace purchased $20,000 worth of Reliant stock. Three weeks later, Reliant made a tender offer to Dakota Gasworks stockholders and purchased 57 percent of Dakota Gasworks stock. Over the next two weeks, the price of Reliant stock rose 72 percent before leveling off. Wallace then sold his Reliant stock for a gross profit of $14.400. Using the information in your textbook.

Would registration with the SEC be required for Dakota Gasworks securities. Explain why or why not.

Did Emerson violate the Securities Exchange Act of 1934? Explain why or why not.

What theory or theories might a court use to hold Wallace liable for insider trading? Explain.

Under the Sarbanes=Oxley Act, who would be required to certify the accuracy of the financial statements Reliant filed with the SEC?