Audit Final Term Paper

Audit Final Term Paper

  • Submitted By: money12206
  • Date Submitted: 03/19/2009 9:55 PM
  • Category: Business
  • Words: 579
  • Page: 3
  • Views: 940


The Farmer’s Cooperative of Arkansas and Oklahoma (Co-Op) sold promissory notes to investors that were payable upon demand to raise money to support it’s general business operations. Co-Op advertised the notes as an “investment program” and offered an interest rate higher than that available on savings accounts at financial institutions. Subsequently, Co-Op filed bankruptcy. The notes were issued by Co-Op are defined as security by the definition of security. The notes were clearly advertised as an investment program and an interest rate was stated in the notes. A promissory notes are also known as securities.

Therefore, the notes were issued by Co-Op were securities by definition of Security.


Donald C. Hoodes was chief executive officer of the Sullair corporation. As an chief officer of corporation, he was granted stock options to purchase stock of the company at a discount. According to the SEC Section 16(b) requires that any profits made by a statutory insider on transaction involving short-swing profits - that is trades involving equity securities occurring within six months of each other '' belong to the corporation. Hoods sold 6,000 shares for $38,350 on July 20,1982. He was terminated on July 31,1982 as an officer of the corporation. On August 20,1982, Hoodes exercised options to purchase 6,000 shares that cost $3.01 per share at that time were trading at $4.50 per share. Since Hoodes was an executive officer when he sold 6,000 Sullair shares, he cannot exercise option to purchase shares to profit within short-swing, Hoodes had to wait six months which is January 20,1983. Although Hoodes was terminated as an officer on July 31,1982, SEC Section 16 continue the rule that insiders are liable for transactions that occurred within six months of the last transaction engaged in while an insider.

Therefore, corporation can bring suit against Hoodes to recover the profits he made on those trades. There is no defense for this...

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