Business LAW Essay Example | Topics and Well Written Essays - 500 words - 2

Business LAW - Essay Example The plan by Johnny Jones to start a new Ethanol manufacturing plant is not a plan that has been included in the company’s registration statement and therefore such a plan should be prevented and suspended. Section 11 of the Securities Exchange act states that it will be deemed unlawful for any person who is a member of any securities exchange to make a transaction on such an exchange for his own account, that of an associated person or exercises an investment discretion. In this case Joan is acting in the capacity of a market maker in that she is a stock broker and therefore such a transaction can be seen been unlawful. Johnny also does not have any authorization to conduct such transactions in ethanol neither does he comply with the rules of the commission. A registration that is made under the exchange act entitles one to make periodic and current reports regarding the company. This is the duty to disclose which is made public for market evaluation of the specific company together with the way the company conducts the pricing of its securities (Smith, Washburne, & Pham). The Securities Act provides a penalty of not more than $10,000 upon conviction while the security exchange act provides that any person or anyone who becomes associated with someone who violates the requirements of the act or makes a false and misleading statement with regard to the act will be liable to a fine of $ 5,000,000 or imprisonment that does not exceed 20 years. In this case, Jonny Jones, Joan and Jake will be liable to such fines and even imprisonment for the violation of the Securities Act and the Securities Exchange Act. They do not have reports for their Ethanol manufacturing thus, they contravened the duty to disclose. Johnny also made a misleading statement to his secretary. Class action suits occur whereby so many plaintiffs sue the same defendant over the same