Question

In-Class Activity #2 (1 point): Chiarella v. US (445 U.S. 222 (1980))

Instructions: IRAC the below case with your partner. You have 15 minutes.

Chiarella is a printer by trade. In 1975 and 1976, he worked as a "markup man" in the New York composing room of Pandick Press, a financial printer. Among documents that petitioner handled were five announcements of corporate takeover bids. When these documents were delivered to the printer, the identities of the acquiring and target corporations were concealed by blank spaces or false names. The true names were sent to the printer on the night of the final printing.

Chiarella, however, was able to deduce the names of the target companies before the final printing from other information contained in the documents. Without disclosing his knowledge, petitioner purchased stock in the target companies and sold the shares immediately after the takeover attempts were made public. By this method, Chiarella realized a gain of slightly more than $30,000 (in 2018 this is equivalent to $130,000) in the course of 14 months. Subsequently, the Securities and Exchange Commission (Commission or SEC) began an investigation of his trading activities.

Answer 1

Issue:

Here the issue is misuse of information provided to the Chiarella(the printer).

Rule:

the printer has used the information of those 5 companies to earn profit by using the information and doing trades in these companies shares which are illegal it is a kind of insider trading which is illegal.

Application:

Here, this voilates the rules of section 10(B) of the 1934 act , SEC rule 10b-5, which prohibits frauds related to securities trading.

Conclusion:

So, the conclusion is that after knowing that the person have misused the information and gained profit from it . penalties can be claimed against him and the person can be sued for voilating the laws.