Anderson's Business Law and the Legal Environment 20th Edition by David Twomey,Marianne Jennings

Exercise 5

Television network CNBC and other television networks have been working to develop policies for their business correspondents and guests on their business shows because of a practice known as pump-and-dump, the practice of a Wall Street professional or network business correspondent appearing on television to tout a particular stock as being a good buy. Often, unbeknown to the viewing audience, the guest or correspondent promoting the stock has a large holding in it and, after the television show runs and the stock price creeps up, sells his or her interest at a higher price than would have been possible before the show on which the person raved about the stock. What category of ethical issue exists here? If you were a network executive, what would you do to remedy the problem? Could the government regulate such practices? What kind of regulation could it impose?