Martha Stewart Insider Trading Essay
INTRODUCTION Martha Stewart a known celebrity and founder of Martha Stewart Living Omnimedia (a business which is built on showing others how to cost effectively manage and decorate the home), who was given a tip by Douglas Fanueil and Mr. Bacanovic, employees of the Merrill Lynch brokerage company. This tip which broke the confidentiality policy of the brokerage company led to the subsequent sale of Martha’s shares in the ImClone company during the latter company’s blackout period with the effects of causing the share price of ImClone’s share to drop and the share price of shares of the Martha Stewart Living Omnimedia to drop after the scandal broke that Martha had engaged in insider trading. Through a series of events, she, her broker and his assistant
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The justifications for our point are as follows: a) Martha Stewart was told by Mr. Faneuil (under direction from his boss who was also Ms. Stewart’s stockbroker) that the largest stockholders of ImClone (Sam Waksal and his daughter Aliza) had sold all their shares in the company on that same day, December 27th, and she immediately sold hers as well. This in itself was a breach of client confidentiality and insider information because no one knew about it but their stockbrokers. By virtue of the position Mr. Bacanovic (Mr. Faneuil’s boss) at the brokerage company of Merril Lynch he was not to mention or discuss the actions of any of his other clients. b) Even though Martha Stewart did not know about the FDA’s unfavourable report about ImClone, the sudden ‘dumping’ of the shares on the market was enough for her to speculate that there must be something wrong and that she should get her shares sold as quickly as possible in order to obtain the best possible share price or avoid a loss. Tipped with the knowledge of the Waksals actions and her intuition of imminent disaster she ordered that her shares in that company be sold as quickly as
The justifications for our point are as follows: a) Martha Stewart was told by Mr. Faneuil (under direction from his boss who was also Ms. Stewart’s stockbroker) that the largest stockholders of ImClone (Sam Waksal and his daughter Aliza) had sold all their shares in the company on that same day, December 27th, and she immediately sold hers as well. This in itself was a breach of client confidentiality and insider information because no one knew about it but their stockbrokers. By virtue of the position Mr. Bacanovic (Mr. Faneuil’s boss) at the brokerage company of Merril Lynch he was not to mention or discuss the actions of any of his other clients. b) Even though Martha Stewart did not know about the FDA’s unfavourable report about ImClone, the sudden ‘dumping’ of the shares on the market was enough for her to speculate that there must be something wrong and that she should get her shares sold as quickly as possible in order to obtain the best possible share price or avoid a loss. Tipped with the knowledge of the Waksals actions and her intuition of imminent disaster she ordered that her shares in that company be sold as quickly as