Discuss whether Hank or Walter are subject to Rule 10b-5 liability. Your answer should be supported by case law and relevant rules.
Adair Products. Inc
Adair Products is the case. Inc has three key players: Walter, Skylar and Hank. Skylar and Walter work together as the company’s C.E.O and R&D, respectively. Hank is only involved as Walter’s friend who works for a different company within the same industry. Rule 10b-5 makes it illegal to defraud anyone through any means. For example, misrepresenting information regarding selling or purchasing security. (Legal Information Institute 2022). Skylar does not face any responsibility under rule 10b-5, as his actions are not evidence that any attempts were made to defraud the company. Walter, the R&D scientist, has major action where he shares market-sensitive information with his friend, hoping that Hank will do the same at some point. Walter is not responsible under Rule 10b-5 for this sharing of information.
To successfully bring a claim against someone or make them liable for a violation of rule 10b-5, certain conditions must be met. This includes an artifice or deceit, making a false statement regarding a material fact and engaging in an action that can be used as a fraud against any person (Legal Information Institute. 2022). Hank is the third participant. It can be proven that Hank used Walter’s sensitive information to perform a fraud or deception.
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