Analysis of Business and Civil Law Cases - Assignment Example

Running Head: Business Law Name Course Lecturer Date Question 1 The chosen media report is “Media Report 3” former Gunns boss John Gay pleads guilty to insider trading. The two areas of law identified in this media report are: a) Commercial/Business law b) Civil law Insider trading identified above is illegal1. John Gay has breached his relation of confidence and trust. On top of that, he has also breached his fiduciary duty while he was in a position and position of non-public information and materials of the securities of the said company. There is some serious conflict of rights of all the parties involved. Consequently, John Gay presented himself with some crucial information which was not with other market participant2. This is considered unfair as other market participant do not have equal chances to take advantage of information that John used for insider trading. Question 2 Ethical insider trading gives all parties equal access to information3. In this way, they are able to organize as well to plan their market securities with reasonable certainty. This is because it provides information to all parties involved in equal measure. In addition, insider trading which is legal and ethical makes the market to be very efficient. It also ensures that the prices of the stocks are depicted more accurately. Though there are some rights which conflict such as free partaking by the insiders in the trade of their security, possession of equal information by the traders and safeguard of the investors against their own naivety, it does create a dilemma about who’ rights are more important than the other. To look in to whether an ethical actions to parties/party which is disadvantaged may have resulted from favoring some certain rights of some party. In this regard therefore, business law and civil law and ethical and legal insider trading allows people to organize and plan their securities with reasonable certainty. The shareholders have got powers in representation of the management. Their rights are represented by the virtue of holding accountable the directors of the company in all aspect. This is so because the shareholders own the company and the directors are hired by the shareholders to run the company on their behalf4. The rights of the shareholders are fairly representation in the company management. Have a right to information about activities and operations of the company. They have a right to be notified on how their securities are trading so that they can be able to organize and plan accordingly. Consequently, shareholders have a duty to provide resources for the directors and managers to learn the company effectively. They have the power to fire and hire any qualified person to work for their company or dismiss them for that matter. On the other hand, the directors have a right to fair treatment in terms of their remuneration working condition and their professional input. They have a duty to work for the best interest of the shareholders, which is maximizing the wealth of the shareholders. However, their power is limited by the fact that they must have approval from the shareholders. Business law and civil law permits fair trading and carrying out of legal and ethical businesses5 (in our media report it is legal and ethical insider trading). However, this is not the case as the insider trading exercised is not ethical and it is illegal. Business law encourages insider trading by providing means of access of information on an equal bases for all involved parties be it the majority shareholders, minority shareholders, company employees or the general public. These two areas of laws forbid in the strongest terms possible cancelling, abstaining and or non-disclosure of information to any party especially when it is done intentionally and for gainful purposes. The laws encourage all businesses that are legal and ethical as outline in Australian constitution. The Australian law contains rules of organization of conducts that are applied, enforced and as well recognized by the powers of the state. These laws are adopted by the state government from the federal government. There are also rules which are non-legal such as the need of cooperating, peer pressure, some feelings of goodwill as well as rules for convenient. These non-legal laws are lawful to the extent of the agreement of the parties. In general, rules whether legal or non-legal are applied for the purposes of deciding cases as and when they applies. The law absolutely creates rights and duties that can be enforced. The law provides the rights and duties of every individual and or organisations in relation to their areas of operations. In this case, the shareholders have their right created and protected in the constitution such as unfair trading activities and exploitation. They have a duty to ensure make accountable those in management positions and checking their work not to misuse it like john gay has done. The business law has rules on insider trading to prevent exploitation and use of such information by the insiders for their gainful purposes. Through the legislature, courts and other authorities, laws are made and the courts enforce these rights and duties. The law as well provides remedies when the rights are infringed or when duties are not performed. The rights of the shareholders of this company have been infringed and they ought to be compensated for the unfair trading. The court should enforce the compensation of the shareholders of the company as the insider trading by the manager resulted in the collapse of the company. Question 3 It is very important that the parties involved in the media report that they know the provisions of the business laws and civil laws outlined in the constitution to safeguard their interests. The laws outlined regulate the behaviour that leads to a business environment that runs efficiently. More to this the laws ensures that there is application of ethical principles and expectations while providing rules of measures, conduct, to enforce the rules and laws, it also provides a means for settling the disputes. This is not forgetting that these laws plays a very important roles in promoting of personal freedom, checking the powers of those in authority, facilitating planning, and the realization of the expectations of the concerned parties, promoting of economic growth by means of free and fair competition and promotion of social justice6. Without the knowledge of the safeguards that are outlined in the law, some parties such as the shareholders will continue to be exploited by the management like john gay have exploited the shareholders by taking advantage of some crucial information to enrich himself by the virtue of his position as the manager if the company. Though some of these laws are complex and intricate, they identify the significance of the day to day business life by safeguarding the interests of all parties. The most affected party is the shareholders; they could have applied the law in their advantage by ensuring that they were represented in the management of the company so that they important information like this insider trading could be communicated7 to them. However representation cannot do as much to protect them, insider trading is a case of breach of fiduciary trust as well as confidence and this is hard to prevent as it depends with the individuals bestowed with holding such information. On the other hand, the boss of guns, john gay used information to benefit himself in the expense of the collapse of the company. He used the information to his advantage though illegally and unethically. Question 4 There are two sources of law. This include i. Legislation law ii. Case law Knowledge of law (all types and sources) helps an individual or an organization to constructively achieve the desired outcomes8. It creates enforceable agreement for services and good. Furthermore, it helps in acquiring and protecting ones rights, business rights and property rights. They create fair trading environments where business organization are created and use and compete in financial systems healthily. Legislation law Legislation law is a process or an act of making or enacting laws that are so made. This process and procedure is governed by the constitution. Legislation law is consisted of declaration of rules which are legal by an authority which is competed and so given powers to declare such rules. The direct and most common source of law is the legislature. Therefore, the legislature enacts and makes law. It makes amendment to some old laws and cancels some laws as it deems fit. It is also responsible for framing new set of law. The most important law making source in modern times is the legislature. There are different stages involved in legislative process which include bill, first, second and third readings, the royal assent and commencement. The interpretation of legislation is sometimes uncertain. Case law Case laws are legal principles that are enunciated as well as embodied in some decided judicial decisions which are resultant of application of specific low areas direct to the fact of individual cases. These are usually cited as precedent and are usually distinguished and interpreted from statutory laws which are codes and statutes that are enacted by legislative bodies9. Case laws are interpretation and decisions that are made from making decision on legal issues before the judges by the judges. They are usually considered as common law and an aid for the interpretation of law in successive cases with comparable conditions. Advocate use case laws in supporting their views. When there is a case in court, judges has to make decision which is based on details before the judge. He can however not take any decision in his own capacity even though he knows all the truth about the case. He/she has to evaluate the clients; witnesses and most import ant examine the evidence that is given by the client. The sources of law raised in this media report are the legislative law and the case law, they are documented laws enacted by the legislature on insider trading and in deciding this case they would be used10. In the same case, case law is as well raised, there are insider trading cases that have been decided are used as a reference by judges in deciding other similar insider trading cases such as this one. Both case law and legislature law are raised and would be used in deciding the case. References Bris, Arturo "Do insider trading laws work?" European Financial Management 11, no. 3 (2005) Bushman, Robert M., Joseph D. Piotroski, and Abbie J Smith "Insider trading restrictions and analysts' incentives to follow firmse9" The Journal of Finance 60, no. 1 (2005) Fidrmuc, Jana P., Marc Goergen, and Luc Renneboog "Insider trading, news releases, and ownership concentration" The Journal of Finance 61, no. 6 (2006) Cheng, Qiang, and Kin Lo "Insider trading and voluntary disclosures" Journal of Accounting Research 44, no. 5 (2006) Beny, Laura Nyantung "Do insider trading laws matter? Some preliminary comparative evidence" American Law and Economics Review 7, no. 1 (2005) Fernandes, Nuno, and Miguel A. Ferreira "Insider trading laws and stock price informativeness" Review of Financial Studies 22, no. 5 (2009) Manne, Henry G. "Insider trading: Hayek, virtual markets, and the dog that did not bark" bepress Legal Series (2005) Lyon, Gregory J., and Jean J. Du Plessis The Law of Insider Trading in Australia The Federation Press, 2005 Dorn, Nicholas "The metamorphosis of insider trading in the face of regulatory enforcement" Journal of Financial Regulation and Compliance 19, no. 1 (2011) Read More