Mebel, Doran & Company is a Philadelphia base company, which start up as merchants, importers and shippers, then develop to financial operation business. Moreover, company offer service in stock and bond market such as trading service and M&A. Company see growing importance of M&A as a source of revenue to securities firm like itself.
Knox Corporation is a diversified manufacturing firm base in Philadelphia. This company was one of the oldest Mebel, Doran & Company clients. Company wants to acquire Dover, Delaware-based Power-Tie corporation and decide to use Mebel, Doran & Company service. Mebel, Doran & Company will help to provide bridge financing for proposed tender offer for Knox The issue
Mebel, Doran & Company involved in insider trading on Power-tie Corporation. Shares price of power-tied goes up, Mebel, Doran & Company benefit from the capital gain, on the other hand, Knox Corporation (client company) ruined by that run up. This issue is caused by leak out insider information, while acquisition is in progress. Even though, Company has a confidential protection called “ Chinese wall” among M&A group and others group such as risk arbitrage desk. Harvey Hegarty, CEO of Mebel, Doran & Company is working on this problem and finding out the main source of problem. He investigated and found that the stock price and volume trade of acquisition target are increased suspiciously. The main problem behind the scene is because its M&A employees break the wall by consulting with risk arbitrage desk. Since the latter department has more specialize skill with important to work on this case. Moreover on the investigation, He found that arbitrageur contacted and used another securities firm to speculate the price of Power-Tie stock over the week after he had information about this merger and acquisition and before this issue is came up....