SOX and Insider Trading - Problem 23-13, page 670 in your text (graded)

Review problem 23-13, found on page 670 of your eBook. Let's look at corporate malfeasance, both specifically as it is seen in the case of Mr. Bleakney and NMC, and more generally, at companies across the country. It seems as though there is an outbreak of corporate "bad ethics" that is translating into escalating costs for compliance and policing. Along with the SEC and their policing and efforts at ending bad business practices that relate to the stock market, we also have the Sarbanes-Oxley Act, also known as SARBOX, or SOX, which is becoming a big buzzword in the business world. We will look at that here and in the other topic. As part of that discussion, start thinking about the ways different officers of the company will look at and use or follow SOX (i.e., the CEO, CIO, and CFO).

1. To start this discussion, let's look at the conduct of Mr. Bleakney: Was his conduct illegal under the Securities and Exchange Act, and more specifically, Section 10(b) and Rule 10b-5? If so, how?

1.1 If his conduct was not illegal under Section 10(b) and Rule 10b-5, explain why not.
1.2 Was his conduct unethical? Why or why not?

2. If Mr. Bleakney is able to avoid prosecution under the 1934 Securities and Exchange Act, will he be subject to prosecution under Sarbanes-Oxley?