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Considering the case held against Falbo, his act of using confidential information for his personal gain make his case to fall under the Misappropriation Theory.Discussion According to Misappropriation Theory, any individual who accesses and uses any confidential information wrongfully to purchase or sell securities is considered as being guilty of securities fraudulence. According to Wolfson (1990), misappropriation is a infringement of a responsibility owed to the individual who provided the confidential information and then goes further to share the information with others or act with regard to the confidential information. In this case, Falbo’s act of eavesdropping confidential conversations from the executive offices is considered as misappropriation act. In addition, executive’s secretary is also guilt of sharing this confidential information with Falbo. This is based on SEC Rule 10b-2 which stipulates that, any person who is in connection with deceptive purchase or sale of securities contravenes the law. In this regard, both Falbo and executive’s secretary are all guilty of securities fraud.

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Roush, C. (2004). Writing business and economics stories: The SEC law. London: Lawrence         Erlbaum Associates.   

Wolfson, N. (1990). Amendment rights and the SEC. New York: Quorum Books.