A fiduciary being refers to someone who undertakes to act for or on behalf of another with regards to any particular matter, and under circumstances from which a relationship of trust and confidence between the two parties is developed. A fiduciary duty then, is the duty owed by an employee to the company and to its shareholders
Generally, shareholders determine the action to be taken by the company by casting a vote, whereby the majority vote prevails. In this case, the majority voted for the sale of the corporation, and this was the reasonable thing to do, considering that the corporation was making losses. The minority shareholders’ claim will prevail because there was a breach of the fiduciary duty vested upon the directors, who seem to not have acted in good faith, as in their expressions, they were not truthful about the economic position of the company. On the same note, they sold the company to the benefit of only the big stakeholders and at the expense of the small holders.
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All of the individuals in question acted improperly, as they used confidential company information to trade in the company’s shares, and even though previously, this information had not been released to the public. The government can allege illegal insider trading, an offence provided for under the Security Exchange Act of 1934. This act was enacted following the 1929 market crash. Insider trading is the stock trading of a publicly traded information by individuals with access to non-public information about the company’s stock trade. This would be a civil suit as provided for in Section 21 of the Act; one, against the accountant who had the fiduciary duty to protect the interests of the shareholders but did not and secondly, against the stock broker and also, against the Trusty Painter, for their illegal purchase of stock. The penalty available for this shall be determined by the court, but it should not exceed three times the profits made. A criminal suit might be instituted, but only if the amount of money involved is big enough. A private action can be brought against the three in any court of competent jurisdiction on account of illegal insider trading as provided for in Section 20 of the Act, as the stock broker and the Trusty Painter, both knew that this information was non-public but went ahead to conduct the trade anyway.
Employees owe a company’s shareholders a fiduciary duty of protecting their interests, making sure that they don’t have a conflict of interests while promoting the dealings of the company.
