The ImClone Stock Insider-Trading Case

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The Introduction

The legal issue proposed for consideration is insider-trading activity, which is considered from the perspective of criminal liability. Feinberg and Goldwasser (2004) describe Martha Stewart’s case and examine it from the perspective of the validity of a trial involving the woman’s violation of employment principles, in particular, the trading of shares after gaining access to confidential information. As a plaintiff, ImClone seeks to prosecute the defendant, Martha Stewart, and prove that she received classified inside data before deciding to sell her shares of the organization’s stocks. The issue is as follows: is Martha Stewart guilty of the insider activity she is accused of by the United States Securities and Exchange Commission (SEC)?

The Rule

When taking into account the specifics of Martha Stewart’s case, one should pay attention to the relevant law that defines the degree of responsibility and imposes specific charges on an individual committing corresponding offenses. According to the definition presented by the SEC, “illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security” (“Insider trading,” n.d., para. 1). In this context, a person who has committed the deliberate manipulation of securities is subject to punishment in accordance with the existing financial legislation.

A rule governing this scope of civil liability was proposed shortly before Martha Stewart’s case. In 2000, the U.S. The Securities and Exchange Commission (2000) passed a specific law with the appropriate amendments. This rule affected the public sphere and was “designed to promote the full and fair disclosure of information by issuers, and to clarify and enhance existing prohibitions against insider trading” (U.S. Securities and Exchange Commission, 2000, para. 1).

Such a principle of control based on the prosecution of individuals has become a unified standard for court hearings and defined the principles of legal liability for illegal insider activity. The law was presented as a wide list of justifications for adoption, arguments in favor of new legislation over outdated control principles, as well as the discussion of individual cases and their implications.

The Analysis

The analysis of the proposed rule on insider activity and the corresponding punishment for it in the context of Martha Stewart’s case allows discussing specific provisions of the law by using a real example. Feinberg and Goldwasser (2004) note that the defendant received inside information from a person possessing data about upcoming fluctuations in the exchange market. Since Martha Stewart’s assets were directly dependent on the value of her shares, she used this classified information to get rid of the securities at the pre-crisis price.

Such a decision falls within the scope of liability set out in the rule of 2000. Since the information obtained by Stewart was not public, disclosing it amounted to a violation of the act about privacy liability (“Insider trading,” n.d.). After entering into an agreement with a confidant, she took an opportunity to make a profit, which also equates to the violation of the law and determines her guilt.

As a result, while taking into account the aforementioned circumstances, the court confirmed Martha Stewart’s guilt of prior conspiracy to profitably use insider data for personal gain. The principle of confidentiality, indicated in the rule, became one of the main criteria for assessing the defendant’s and her accomplice broker’s guilt. From Martha Stewart’s position, she only took advantage of an experienced employee’s recommendations who worked in an area in which she understood little, which allowed her to avoid financial losses. However, this activity fell under the violation of the law and became a pretext for bringing her to criminal responsibility.

The Conclusion

Martha Stewart’s detention with the proof of her guilt is an objective decision under the current law on illegal insider activity. Obtaining classified information from personal sources is the reason for criminal prosecution. The court’s decision does not contradict ethical or other aspects and is based on the interpretation of the existing regulatory framework, which explains the credibility of the decision in favor of the plaintiff.

The Questions

Acting as a judge, I would make an identical decision in view of the facts proving the defendant’s guilt, in particular, fraudulent insider activities committed by prior collusion. Being not only a media personality but also an entrepreneur, Martha Stewart was aware of the criminal responsibility that threatened her in the case of declassification. In addition, the testimony of her accomplice broker corroborates the fact that private data were passed to her shortly before the company’s securities crisis. This case is significant for the business field since it demonstrates a real threat that fraudulent activities pose to personal authority and freedom.

The long-term implications of the court’s decision are associated with providing a precedent background and setting an example of how dangerous it can be to obtain classified information about securities for personal purposes. From a Christian perspective, the ramifications of the case relate to the aspects of honest entrepreneurship and fair punishment for deception. Therefore, this proceeding supplemented by a sufficient evidence base does not carry ambiguities.


Feinberg, A., & Goldwasser, J. (2004). Are you guilty of insider trading? Kiplinger’s Personal Finance, 58(1), 48-48.

Insider trading. (n.d.). Investor. Web.

U.S. Securities and Exchange Commission. (2000). Final rule: Selective disclosure and insider trading. Web.

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BusinessEssay. "The ImClone Stock Insider-Trading Case." November 27, 2022.