Movie Boiler Room Legal Perspective - Essay Example

The film “Boiler Room” contains a representation of a number of illegal activities that can be executed in the stock trading business. The sale of securities, with the public interest imbued in the business, is regulated closely by the U.S. Securities and Exchange Commission. An activity by the firm JT Marlin is the sale of stocks based on false company information that is known to the traders to be worthless. This is shown in the transactions between Seth Davis and Harry Reynard. Based on the contact sheets, Seth as a trainee calls Harry and offers him shares on Farrow Tech offering information that the company has a revolutionary new drug that will soon be approved by the Food and Drug Administration.

On the promise of high returns, he lures the buyer by initially selling a minimum amount on the basis of testing the waters. Then, when the stocks have had a minimal percentage gain, Harry would fall at ease with Seth as his broker. However, when the stocks dropped, Harry wanted to pull out his money but Seth reels him back in by declaring he has information that the drug will actually soon be approved. He pushes it further claiming there is another product to hit the market and eventually was successful in attaining a $50,000 dollar investment from Harry.

The latter had consequently invested his family’s entire savings (Younger, Boiler Room). These actions constitute fraud in the inducement contrary to law. The elements of this kind of fraud are: “1. a false representation; 2. of a fact; 3. that is material and; 4. made with knowledge of its falsity and the intention to deceive (scienter); and 5. which representation is justifiably relied on” (Mann and Roberts 211). More specifically, it is fraud through false representations. Since ordinarily, nondisclosure in sales does not constitute an actionable offense, the misrepresentation must have the following requisites: “(1) a person fails to disclose a fact known to him; (2) he knows that the disclosure of that fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract; and (3) nondisclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing” (Mann and Roberts 211-212).

There is material false representation in the movie since all the information Seth told Harry were not based on any factual assertion but were just fabrications made by JT Marlin . Based on these representations, people bought the shares he offered. In fact, despite knowledge of the escape plans of Michael Brantley such as the phone-filled room on the other building or that paper were concealed and even the fact that he saw that Med Patent Technologies was a sham, he did not do anything about it and continued trading.

There was intent to deceive by JT Marlin and its brokers such as Seth Davis and these representations were relied on by the people they pitched to such as Harry Reynard. In violation of the safeguards provided for by law against trading schemes such as this, people like Reynard will win in a court of law. Works CitedBoiler Room. Dir. Ben Younger. Perf. Giovanni Ribisi, Vin Diesel and Nia Long. New Line Cinema, 2000. Film.Mann, Richard, and Barry Roberts. Business Law and the Regulation of Business.10th ed. Mason, OH: South-Western Cengage, 2010. PDF File.