Former Cape broker named in stock scam Harvard Case Solution & Analysis

Former Cape broker named in stock scam Case Solution 

 The Security Exchange Commission (SEC) fielded the complaints against Chauncey D. Steele and other five brokers on August 2004. The Steele was accused of involving in the fraud of influencing the stock shares of CTT in order to bring the inflation.

The claim by the SEC towards Steele and the other five brokers were of raising the price of the shares of CTT through different tactics. The measure tactics of Steele used for cheating the clients entailed “Painting the tape”, “Matched Trades” and ”marking the close”.

The terminology ‘Painting the tape’deals with the illegal influence of the buying and selling of the securities of a company. With the Painting the tape strategy, the broker artificially appears the price of the shares as high as he wants. The Painting the tape causes illustration for the investors to purchase the shares of the company. The investors are attracted by the extraordinary trading volume of the company and invest more through this strategy. Furthermore, the brokers also use to act near the closing of the exchange. Wide transactions cause to interpret the worthy size of shares of the company to the investors. Hence, the investors are able to observe the market value of the high widely transitioned company very carefully.

Another strategy that Steele used was Matched Trade. Moreover, the Match trade involves buying and selling of the shares simultaneously. Steele used this strategy in order to not miss the opportunity of the profit for the company, CTT. The third tactic used by the Steele was transactions made near to the closing of the stock.  Thus, the Steele was able to create illusion of the CTT in the investor’s eye.

Nonetheless, the SEC could not get the clear identification of leaving Prudential Securities as the Steele was involved in the Tennis along with his job in Prudential. Thus,in June 2005, the penalty charged to Steele was just as the fine in the form of cash. The SEC only charged him for the jurisdiction. Thus, the sections 9(a), 10(b) and 17(a) were applied to Steele. However, the Exchange Act Rules 10b-5 and 17a-3 and 17(a) of the Securities Act of 1933 charged the Steele for $47,439. Moreover, the civil penalty, according to Section 21(d)(3) of Exchange Act and Section 20(s) of the Securities Act charged him $110,000................

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