Was Insider Trading Ahead of Takeovers a Problem?
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On January 6, 2010, Stanko Grmovsek was sentenced to three years and three months in prison for making profits of an estimated US$9 million over 14 years based on insider tips from his best friend from law school, Gil Cornblum. Grmovsek and Cornblum had operated an illegal insider trading scheme from 1994 until 2008. Using his role as a corporate lawyer at various law firms, Cornblum had passed material non-public information related to 46 takeovers to Grmovsek, who then traded illegally using brokerage accounts located in the Bahamas and Ontario. On October 27, 2009, Grmovsek pleaded guilty to all charges against him in both Canada and the United States following a joint investigation by the U.S. Securities and Exchange Commission (SEC) and the Ontario Securities Commission (OSC).
This case can be used in a variety of contexts including in a business ethics course or as an introductory case discussion in an undergraduate or MBA program in order to allow students to take a point of view on insider trading and defend that point of view while being respectful of others.
- Highlight the distinction between ethical behaviour versus legal behaviour.
- Debate the pros and cons of allowing insiders to trade.
- Discuss the broader impact of illegal activity on markets and the economy.
Finance and Insurance
Canada; United States, Medium, 2010
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