¶ … sale, and take over, of Trans-National Airlines (TNA)
encompasses a series of stock transfers which, given the dissemination of information from TNA's CEO to his secretary, is of questionable propriety. Similar information was
disseminated by one of Trans-National Airlines' board members to a friend who acted upon such information by passing it along to a friend who transitioned stock ownership in TNA; again making this stock transfer of questionable propriety.
Robert sold his stock in TNA to Susan, the secretary for the CEO of Trans-National
Airlines based upon false information she specifically provided him; to wit Susan
advised Robert that "TNA is going down the tubes" and offered to buy his stock at a low rate - $2 per share -- as a favor. Susan's knowledge of the pending take over of TNA
placed her in the proverbial catbird seat in that she held proprietary knowledge from the secret TNA board of directors meeting; Susan then was aware that TNA
stock would become more valuable after Hawke's take-over and as such violated the Securities Exchange Act of 1934. Because Robert relied upon
Susan's representation that "TNA is going down the tubes" despite her knowledge to the contrary, he could bring an action against Susan for her fraudulent misrepresentation, as had Susan relayed the full scenario surrounding the pending take over of TNA,
Robert likely would have held to his TNA stock.
2. It is not as clear whether Howard has a legal action against Angela, the TNA Director who advised a third party, her friend,
Foster, of Hawke's pending take over of TNA. Angela did not take action to buy or sell stock, rather a third party friend, Foster, benefited from Angela's knowledge via her position as a TNA Director and purchased stock at the rate of $4 per share from Howard
understanding that TNA's Board would fight Hawke's take over attempt and accepting the risk of the outcome of the hostile takeover.
In a Securities and Exchange Commission investigation, Leo would be found to be counsel for the firm representing Hawke in his take over attempt of TNA and thus ethically bound to maintain the confidence/secret plans of his firm's client. In purchasing
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