• Choose one of the scenarios below and discuss whether or not you believe the firm has violated the law. Make sure to fully explain your answer, considering both the securities law and corporate governance issues that the corporation must address.
  • Insider Trading: Boreco Drilling company drilled a hole in 2017 that appeared to yield a core with an exceedingly high mineral content. Keeping this secret, Boreco officers, directors, and employees made substantial purchases of company stock or accepted stock options. On April 11, 2018, an unauthorized report of the discovery appeared in the newspapers. On April 12, Boreco issued a press release that played down the find. Later, after the completion of test drilling, Boreco announced a strike of at least 25 million tons of ore, substantially driving up the price of its stock.
  • Securities Act of 1934 rules 10(b) and 10b-5: OfficeRight specializes in professional services and business information. iDiscover, an OfficeRight subsidiary, performed litigation support, working mostly for Big Bank. When Big Bank expressed concern about OfficeRights finances and indicated it would send no new work to iDiscover until the concerns were resolved, OfficeRights board authorized the sale of iDiscover. OfficeRight did not immediately disclose these facts to the public. Soon after revealing that a decline in revenue exceeded our expectations, largely due to a reduction in new work from iDiscovers largest customer, OfficeRight filed for bankruptcy.
  • Securities Act of 1933 Section 12(2): Sean Holder and the other shareholders of the Bane Co. contracted to sell their stock to Purchase Place, Limited Partnership, and others. The price was based in part on an estimated increase in the value of Bane since the end of the previous year. The contract provided that the price would be adjusted if, at the end of the current year, an audit showed the actual value to be more or less than the estimate. At the end of the year, according to the audit, the buyers were entitled to an adjustment. Claiming that the contract was a prospectus, the buyers want to rescind the deal.