Question 1

In a world of electronic trading connections and twenty-four hour markets, it is
now possible to provide all potential investors with truly equal access to material
information.

Accepted Answer

Despite advancements in technology, disparities in access to information still exist due to factors like differences in technology infrastructure, varying levels of financial literacy, and regulatory differences across regions.

Question 2

The Insider Trading Sanctions Act, the Insider Trading and Securities Fraud Enforcement Act and the Regulation Fair Disclosure rule were all passed in an 	effort to prevent insider trading.

Accepted Answer

These three laws and regulations were indeed implemented to prevent insider trading. The Insider Trading Sanctions Act (1984) increased penalties for illegal insider trading and required companies to implement compliance systems. The Insider Trading and Securities Fraud Enforcement Act (1988) expanded the scope of insider trading violations and increased penalties for securities fraud. The Regulation Fair Disclosure rule (2000) requires companies to disclose material information to all investors at the same time, to prevent selective disclosure to insiders.

Question 3

The insider trading cases of the 1980s led to monumental fines but no prison
sentences.

Accepted Answer

This statement is false. Several individuals involved in insider trading during the 1980s were actually sentenced to prison, including Ivan Boesky and Michael Milken. Boesky served two years in prison while Milken served two years and paid a $600 million fine.

Question 4

The BCCI bank was founded as the first multinational Third World bank.

Accepted Answer

The BCCI (Bank of Credit and Commerce International) was founded in 1972 as the first multinational Third World bank, with its headquarters in London and operations in 69 countries.

Question 5

Many of the S & L fraudsters were assisted by highly paid accountants, lawyers
and appraisers.

Accepted Answer

This statement is true. Many of the savings and loan (S&L) fraudsters were assisted by highly paid professionals such as accountants, lawyers, and appraisers who provided support for fraudulent activities.

Question 6

Once the S & L frauds were revealed, it was possible to prosecute them swiftly
and harshly.

Accepted Answer

It took many years to fully investigate and prosecute the S & L frauds, and even then, some individuals were not held accountable for their actions.

Question 7

Employees of a corporation that has been taken over benefit from greater job
security and opportunities, although ordinary investors may lose money.

Accepted Answer

When a corporation is taken over, employees often face uncertainty regarding job security due to potential restructuring, layoffs, or changes in corporate strategy, while the impact on ordinary investors can vary depending on the terms of the takeover and its effect on stock prices.

Question 8

Even conservative economists adopt the view that insider trading is illegitimate
and should be prohibited.

Accepted Answer

Some conservative economists argue that insider trading can lead to more efficient markets by quickly incorporating information into stock prices, though this view is not universally accepted.

Question 9

According to the text insider trading is a quintessential form of white collar crime.

Accepted Answer

The text states that insider trading is a quintessential form of white collar crime, meaning it is a prime example of this type of criminal activity.

Question 10

The massive looting of the S & Ls was not undertaken for direct personal benefit,
but rather to finance illegal enterprises.

Accepted Answer

The statement suggests that the looting of S&Ls was not done for personal benefit, but rather to finance illegal enterprises. However, this is not entirely true. While some individuals involved in the S&L crisis may have had other motives, many were directly benefiting from the fraud and mismanagement of these institutions.

Question 11

Violation of trust may be a principal attribute of all white collar crime, but it virtually defines insider trading.

Accepted Answer

Insider trading involves using privileged information for personal gain, betraying the trust of the organization and its investors. Therefore, violation of trust is a defining characteristic of insider trading.

Question 12

Due to the availability of high-priced legal talent, neither Charles Keating nor any
of the other high-level S & L fraudsters received prison terms.

Accepted Answer

Charles Keating and several other high-level S&L (Savings and Loan) fraudsters did receive prison terms for their roles in the S&L crisis, despite having access to high-priced legal talent.

Question 13

Only a relatively few harsh prison sentences were imposed on S & L fraudsters.

Accepted Answer

In the aftermath of the Savings and Loan crisis in the 1980s and early 1990s, while some individuals were prosecuted, relatively few received harsh prison sentences compared to the scale of the fraud.

Question 14

Insider trading is characterized by unusually clear statutory definitions of the
offense.

Accepted Answer

Insider trading laws are often complex and can vary significantly between jurisdictions, making the statutory definitions of the offense not always clear or consistent.

Question 15

The major rationale for prohibiting insider trading is that it creates a
fundamentally unfair market.

Accepted Answer

Insider trading gives those who have access to non-public information an unfair advantage in the stock market, which undermines the integrity of the market and puts other investors at a disadvantage. This is why it is prohibited by laws and regulations.

Question 16

The victims of the BCCI fraud were disproportionately located in Third World
countries.

Accepted Answer

The majority of the victims of the BCCI fraud were from developing and Third World countries, including Africa, Asia, and the Middle East.

Question 17

The loss of confidence in the integrity of the market is a cost of insider trading.

Accepted Answer

Insider trading can lead to unfair advantages for certain individuals or groups, causing the rest of the market to lose confidence in the fairness and integrity of the market. This loss of confidence can result in reduced participation in the market and can ultimately harm the overall economy. Therefore, the loss of confidence in the integrity of the market is a cost of insider trading.

Question 18

Defendants in the insider trading cases pursued by the SEC and the U.S.
Department of Justice in the 1980s were often allowed to settle if they would
admit guilt.

Accepted Answer

Defendants in insider trading cases pursued by the SEC and the U.S. Department of Justice were often allowed to settle without admitting guilt, typically paying fines or agreeing to other penalties instead.

Question 19

Common law always prohibited corporate insiders from trading on the basis of their privileged information.

Accepted Answer

Historically, common law did not always explicitly prohibit corporate insiders from trading on the basis of their privileged information. The regulation of insider trading has evolved over time, with specific laws and regulations being developed to address the issue more directly.

Question 20

The complex and highly developed international regulatory system relating to
banking was the one constraint on the development of BCCI.

Accepted Answer

The failure of BCCI was due to a wide range of factors including fraud, poor corporate governance, and lack of effective supervision by regulatory authorities, rather than constraints imposed by a complex and highly developed international regulatory system.

Quiz 6: State-Corporate Crime, Crimes of Globalization, and Finance Crime

In a world of electronic trading connections and twenty-four hour markets, it is now possible to provide all potential investors with truly equal access to material information.

The Insider Trading Sanctions Act, the Insider Trading and Securities Fraud Enforcement Act and the Regulation Fair Disclosure rule were all passed in an effort to prevent insider trading.

The insider trading cases of the 1980s led to monumental fines but no prison sentences.

The BCCI bank was founded as the first multinational Third World bank.

Many of the S & L fraudsters were assisted by highly paid accountants, lawyers and appraisers.

Once the S & L frauds were revealed, it was possible to prosecute them swiftly and harshly.

Employees of a corporation that has been taken over benefit from greater job security and opportunities, although ordinary investors may lose money.

Even conservative economists adopt the view that insider trading is illegitimate and should be prohibited.

According to the text insider trading is a quintessential form of white collar crime.

The massive looting of the S & Ls was not undertaken for direct personal benefit, but rather to finance illegal enterprises.

Violation of trust may be a principal attribute of all white collar crime, but it virtually defines insider trading.

Due to the availability of high-priced legal talent, neither Charles Keating nor any of the other high-level S & L fraudsters received prison terms.

Only a relatively few harsh prison sentences were imposed on S & L fraudsters.

Insider trading is characterized by unusually clear statutory definitions of the offense.

The major rationale for prohibiting insider trading is that it creates a fundamentally unfair market.

The victims of the BCCI fraud were disproportionately located in Third World countries.

The loss of confidence in the integrity of the market is a cost of insider trading.

Defendants in the insider trading cases pursued by the SEC and the U.S. Department of Justice in the 1980s were often allowed to settle if they would admit guilt.

Common law always prohibited corporate insiders from trading on the basis of their privileged information.

The complex and highly developed international regulatory system relating to banking was the one constraint on the development of BCCI.