Comet Corporation has just invented a new cure for the common cold. It has decided not to release this information to the public until such time as it can file a patent application. Sam, a director, buys 10,000 shares of common stock on July 27 at $50/share, one week before disclosure is made. On August 3, after the disclosure is made, the stock rose to $100 a share and Sam sold all of his shares.

Please answer the following:

1. Using the slide on "Insider Trading," is this information material? Why?

Insider Trading Why is it important to regulate insider trading? Illegal because it gives the violator an important advantage over the general public and other shareholders Who is an insider? An Individual who receives private information that is material and who does not refrain from disclosing it to other parties. You do not have to be \"inside\" the company to violate insider trading rules if the information you are using to trade is material. Examples of material information: > Change in status of litigation against the company Change in dividends V Contract for the sale of corporate assets or purchase of assets V New product, process, or discovery V Significant change in the financial status of the company Theories SEC uses to apply to insider trading Misappropriation Theory Individual wrongfully acquires ("misappropriates") and uses inside information for trading for their personal gain, can be held liable for insider trading Tipper/ Tippee Theory Individual acquires material inside information as a result of an insider's (director, officer, important shareholder) breach of duty and has engaged in insider trading The Martha Stewart Case https://www.youtube.com/watch?v=2BtawLeS5fMHow do We make Ethical Decisions? The Golden Rule The idea that we should interact with other people in a manner consistent with the way we would like them to interact with us has deep historical roots. Both Confucius and Aristotle suggested versions of that guideline. One scholar has identified six ways the Golden Rule can be interpreted: 1. Do to others as you want them to gratify you. 2. Be considerate of others' feelings as you want them to be considerate of yours. 3. Treat others as persons of rational dignity like you. 4. Extend brotherly or sisterly love to others, as you would want them to do to you. 5. Treat others according to moral insight, as you would have others treat you. 6. Do to others as God wants you to do to them. Regardless of the version of the Golden Rule we use, this guideline urges us to be aware that other peopletheir rights and needsmatter. The focus on others that is the foundation of the Golden Rule is also clearly reflected in a second ethical guideline: the public disclosure test. Public Disclosure Test One way to think of the public disclosure test is to view it as a ray of sunlight that makes our actions visible rather than obscured. The public disclosure test is sometimes called the television test, for it requires us to imagine that our actions are being broadcast on national television. The premise behind this general guideline is that ethics is hard work, labor that we might resist if we did not have frequent reminders that we live in a community. Given our role as a member of a community, our self-concept is tied, at least in part, to how that community perceives us. Universalization Test A third general guideline shares with the other two a focus on the "other"the stakeholders whom our actions affect. Before we act, the universalization test asks us to consider what the world would be like if our decision was copied by everyone else. Applying the universalization test causes us to wonder aloud: \"Is what I am about to do the kind of action that, if others followed my example, makes the world a better place for me and those I love?\