- Briefly explain spoofing or insider trading (whichever one you have chosen) and why it is illegal (e.g., effect on business, society);
Spoofing is the creation of a false impression of high demand by manipulating the market through large buying or selling of a financial asset. This action induces unintended decisions from market participants, which results in losses (FLEISCHAKER). Spoofing is illegal in many countries; This is because un bonafide transactions pose a risk to the stability of future markets, a resultant factor of diminished confidence in market participants.
- What is the specific statute and/or regulation violated by this conduct?
Spoofing violates section 17(a) of the Securities Act of 1933, section 10b of the Securities Exchange Act of 1934 and rule 10b-5 (U.S. SECURITY AND EXCHANGE COMMISSION).
- Identify the SEC case you have selected and provide a link to the case;
it is a SEC case against john Maccoll, an investment professional. https://www.sec.gov/litigation/litreleases/2018/lr24230.htm
- Describe the violation illustrated by the case, e.g. Who are the parties? What did the violator(s) do that constituted spoofing or insider trading? Who was harmed by the violation?
It is a case between John Maccoll and 15 customers. SEC accuses Defendant John Maccoll following a 4 million dollar security fraud that John committed against 15 of his retail brokerage. John tricked his customers into a private fund investment whereby he fraudulently guarantees his customers a 20% annual investment returns and an expanded portfolio. Ultimately, John fails to invest the customer’s money, which he steals it for his personal use. Fifteen of the customers end up losing all their money.
- What is the ethical framework you observe was followed by the violator(s) in committing the illegal conduct? (Explain.)
John’s fraudulent activity presents a Utilitarian ethical framework. Through this approach, John manipulates their mutual trust from the existing long-standing relationship to conceive his customers. High investment returns, a unique opportunity rare to small, retail investors, and diversification of portfolios are promises which seem reasonable to the 15 customers.
- Explain how the case was resolved, e.g., What happened to the violator(s)? What were the penalties levied against the violator(s), if any?
Investigations are still ongoing. However, the SEC’s complaint is advocating judgment to order John to surrender the ill-gotten gains with prejudgment interest and pay the violated civil penalties.
- Do you believe the result is a just resolution of the violation? Why or why not?
I do not think that the result is fair. It is because the victims are still in pursuit of their justice. Further, most of them are the elderly, and the retired may be living in misery after losing all their savings.
References
FLEISCHER, ELISE. HOW SPOOFING WORKS & WHY IT IS ILLEGAL. 17 October 2016.