Topic 2: Insider Trading In Chapter 9 of the text, read Case 1 - UBS and Morgan Stanley: An Elaborate Insider Trading Scheme. After reading the case discuss the motivations behind the unethical behavior, who was hurt by the unethical behavior, and explain the context and conditions that are thought to contribute to the behavior. Find at least one source other than the text that discusses this case and provide a link to the source for your classmates.

CASE 1 UBS AND MORGAN STANLEY: AN ELABORATE INSIDER TRADING SCHEME Executives at UBS and Morgan Stanley were involved in an elaborate insider trading scheme from 2001 to 2006. Mitchel Guttenburg was the institutional services director at UBS. He owed $25,000 to his friend Erik Franklin, a trader at Bear Stearns. Guttenburg agreed to pay back Franklin by informing him when UBS research analysts were going to change their stock ratings. Guttenburg had immediate access to this information because he was a member of the UBS research advisory board. Guttenburg gave Franklin the information by sending secret codes in text messages using disposable cell phones. Eventually, Guttenburg participated in the profits generated by the scheme. Another trader at Bear Stearns, Robert Babcock, noticed Franklins trading success and began to follow his trades. Babcock then became part of the scheme. Profits were split in cash to avoid leaving a paper trail. Guttenburg decided to sell his information to traders at other firms. One was David Tavdy at Assent, LLC. As at Bear Stearns, other traders at Assent began to notice Tavdys success. David Glass, another trader at Assent, paid two members of Assents IT department, McKeever and Childs, to access Tavdys computer so that he could mirror Tavdys trades. McKeever and Childs then blackmailed Tavdy and Glass and got $150,000 in exchange for their silence. At Morgan Stanley, Randi Collotta, an attorney in the compliance department, revealed information about upcoming mergers and acquisitions to her husband, Christopher Collotta, and the couples stock broker, Marc Jurman. Jurman tipped off Babcock, who in turn tipped off Franklin. The SEC discovered the scheme as the result of investigating unusual trading activity in the stock of Catellus Development (a Morgan Stanley client) in the account of Erik Franklins father-in-law.