Accounting Case Study

6 June 2016

This paper is about  a case of an illegal insider trading.  The court through Judge Gleeson of  US District Judge for Eastern District of New York approves the Steve Madden Disgorgement Fund which will cause the distribution of a fund taken from Steve Madden, who was found to have been guilty of insider trading in the securities of Steve Madden Ltd (SHOO)  by the SEC. The arrest and indictment of Steve Madden resulted to the suspension of SHOO stock from trading by NASD for two days, which caused the price of the stock of SHOO to drop significantly.[1]

We will write a custom essay sample on
Accounting Case Study
or any similar topic specifically for you
Do Not Waste
Your Time

This paper  proves that insider trading is a crime against anybody who takes advantage of information that is not made available to the public. Another consequence the crime of insider trading is the payment of penalty where the SEC is authorized under existing law to make a finding for discouraging the practice of insider trading and for the reimbursement of the those who become victims of insider trading.

To give meaning to the purpose of the law against insider trading,  the court also appointed  a distribution agent to distribute approximately $850,0000 collected by the SEC in a Distribution Fund to persons who are eligible to recover claims from the said distributor agent. The authorized claimants are those who purchased SHOO shares on May 21, 2000, which coincides when the Madden sold shares in the stock exchange while in possession of material information, which constituted the charge of insider trading.[2]

A deadline was set by the court for proof of claims to be made to the distribution agent on May 18,2006.  From these proofs of claim from potential claimant, the said distribution agent filed her Proposed Distribution Plan (PDA) with the court and served copies of the same PDA to all claimants and the SEC.[3]  Since the PDA proposed the distribution of the fund, including payment of fees due the distribution agent, there is reason to believe that the total distribution was less than the total expenses and claim from the fund.

The PDA requires prior court approval before any payment must be made to claimants. Since the distribution agent assumes that not all will be paid by filing the PDA because part of the payment will include agent’s fees, the claimants and SEC may file written objections by September 30, 2007 addressed to the judge of the court where the PDA was filed.

It can be concluded that violation of the law on insider trading involves penalties, which could reach up to three times the profit the violators realized from the illegal insider trading under Sections 10 and 14 of the Securities Exchange Act of 1934. In addition, criminal penalties may also be imposed[4]. In this particular case, however, there is no mention about the criminal penalties, which may have been filed under a separate proceeding or court that will have jurisdiction on criminal case covered by the law.

As for the civil penalties it appears that the filing of the PDA by the distribution agent implies non possible non-full payment of the claims.  It can be assumed therefore that the amount of the distribution fund may not be a realistic assumption that total amount enforced by SEC from defendant was not enough or has not reached up to three times of the profit earned from the insider trading.   There may be other money or funds to be collected, as there could be other persons who benefited from the insider trading.

Works Cited:

Reh, F. J., Insider Trading:  What is it?  What are the penalties?, {www document } URL, Accessed March 21, 2009

US Securities and Exchange Commission (2007),  Steve Madden Ltd {www document} URL, Accessed

A limited
time offer!
Get authentic custom
ESSAY SAMPLEwritten strictly according
to your requirements