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TCO G. It is discovered that two weeks
before the Ellen show, she had sold $2million in JOSB stock (at a gain of about
$2,200). The morning after her show, Ellen sold JOSB short (which means she was
betting the stock price would go down), and she made another $210,000 in the
next week on that trade. The swing in the price was not directly tied to her
comments, but was suspected to be a result of a recall JOSB made on their
entire line of men’s black and brown dress slacks when it was discovered that
they had been sewn together with white thread. Ellens previous trading activity
shows that she made it a normal practice to “vigorously trade” the stock of any
company with which she did business. A review of her trading activity for the
past year showed that she had bought and sold JOSB stock 25 different times,
including short sales like this one. Her overall trading for JOSB stock for the
last 12 months was a net loss of $82,000.00. Do you think the SEC will file
anything against Ellen for her sales of JOSB? Is there any cause to do so?
Analyze her transactions with respect to insider trading activity (based on
what you know) – and whether she should be concerned. Is her prior trading
activity a defence?