Agency Regulation

Background and Resources
In 1934 Congress created the Securities & Exchange Commission (SEC) to regulate publicly traded stocks and securities. The SEC's responsibilities cover a range of activities. Two types of violations found in SEC cases are: (1) spoofing and (2) insider trading.

Spoofing is a deceptive trading practice to manipulate the market whereby traders place fake orders to trick others into trading at either inflated or depressed prices, resulting in losses to the deceived purchasers and profits to the spoofing traders.
For further information see: spoofing
To find cases: CFTC Spoofing Cases
Insider trading is buying or selling on the basis of personal knowledge the trader has or acquires by benefit of a relationship not available or known to the general trading public (i.e. "insider" information). For further information and finding cases see:
insider trading [gov. website]
Why insider trading is so difficult to stop (CNBC 2023)[web]
SEC Case Listings [gov. website]
For this Discussion, research further, either spoofing or insider trading SEC violations.

In your research, find and share a case example no more than three (3) years old from this year that illustrates the practice you have selected. In your initial Discussion post include the following:

Briefly explain spoofing or insider trading (whichever one you have chosen) and why it is illegal (e.g., effect on business, society);
What is the specific statute and/or regulation violated by this conduct?
Identify the case you have selected and provide a link to the case;
Describe the violation illustrated by the case, e.g. Who are the parties? What did the violator(s) do that constituted spoofing or insider trading? Who was harmed by the violation?
State how the case was resolved, e.g., What happened to the violator(s)? What were the penalties levied against the violator(s), if any?
Do you believe the result is a just resolution of the violation? Why or why not?
Share any other thoughts you have on this topic.

Sample Answer

. Explanation of Insider Trading and Its Illegality

Insider trading involves the purchase or sale of a security while in possession of material, non-public information (MNPI) about that security. It is illegal because it undermines the fundamental principle of the stock market: fairness.

Effect on Business: It erodes investor confidence. If the public believes the "game is rigged," they will withdraw capital, making it harder for honest companies to raise money.

Effect on Society: It creates an uneven playing field where those with elite connections profit at the expense of ordinary pension funds and individual investors.

Specific Statute and Regulation

Insider trading is primarily prosecuted under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. These regulations prohibit any act or omission resulting in fraud or deceit in connection with the purchase or sale of any security.

3. Case Selection (2024 Example)

Case Name: SEC v. Terren S. Peizer

Date: March 2024 (Settlement)

Link: SEC Press Release - SEC v. Peizer

4. Description of the Violation

The Parties: The SEC charged Terren S. Peizer, the Executive Chairman of Ontrak, Inc. The Conduct: Peizer established a "10b5-1 trading plan"—a mechanism intended to allow insiders to sell stock at predetermined times to avoid insider trading accusations. However, Peizer allegedly set up his plan after learning that Ontrak’s largest customer was about to terminate its contract. He sold over $20 million worth of stock before the negative news was made public. Who was Harmed: The investors who purchased Peizer's shares without knowing the company was about to lose its primary revenue source. They suffered significant losses when the stock price plummeted following the public announcement.

5. Resolution and Penalties

The case was resolved through a settled judgment in 2024. Peizer was ordered to pay:

Disgorgement: Over $20 million (the avoided losses).

Civil Penalties: Approximately $4.2 million in interest and fines.