2013 (Mercantile Law) Bar Exam Questions: Essay Question 5

[Answer/discuss the question below. Or check Mercantile Law Instructions; Mercantile Law Essay Questions: 1, 2, 3, 46, 7, 8, 9 and 10; Mercantile Multiple Choice Questions: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15; See also 2013 Bar Exam: Information, Discussions, Tips, Questions and Results]


You are a member of the legal staff of a law firm doing corporate and securities work for Coco Products Inc., a company with unique products derived from coconuts and whose shares are traded in the Philippine Stock Exchange. A partner in the law firm, Atty. Buenexito, to whom you report, is the Corporate Secretary of Coco Products. You have long been investing in Coco Products stocks even before you became a lawyer.

While working with Atty. Buenexito on another file, he accidentally gave you the Coco Products file containing the company’s planned corporate financial rehabilitation. While you knew you had the wrong file, your curiosity prevailed and you browsed through the file before returning it. Thus, you learned that a petition for financial rehabilitation is imminent, as the company could no longer meet its obligations as they fell due.

Soon after, your mother is rushed to the hospital for an emergency operation, and you have to raise money for her hospital bills. An immediate option for you is to sell your Coco Products shares. The sale would be very timely because the price of
the company’s stocks are still high.

Would you sell the shares to raise the needed funds for your mother’s hospitalization? Take into account legal (5%) and ethical (3%) considerations. (8% total points)


  1. No. I will not sell…

    Legal consideration. Insider trading. My boss is an officer of the issuer. Any information I get from him empress or implied constitute an insider.

    Ethical consideration: Not to use any information acquired through my work to the prejudice of coco products co. To keep the trust of my boss. And to keep safe the secrets of the clients of our company. etc etc just to name few…

    The wa

  2. @Let the Sky Fall – oo nga no, applicable dito ang insider trading which is a prohibited act under the Securities Regulation Code and most likely ito yung most appropriate legal consideration na hinahanap ng examiner.

  3. Yes I will sell the shares and neither legal nor ethical boundaries will be crossed because it does not involve an insider trading.

    To constitute insider trading, which is prohibited under the law, the person came into information of confidential in nature, not available to the general public, by reason of his employment or position, and such information was disclosed by him to the prejudice or even in favor of the corporation…

    Rudy did not disclose any confidential info not availabl to the general public, hence neither legal ethical boundaries will be crossed upon..

  4. No i will not sell. Constitutes insider trading is illegal. Prove it applies.

    Even assuming mom was sick. Legal ethics, UDID, a lawyer shall not engage in Unlawful, Deceitful, Immoral, Dishonest conduct.

    While selling shares para mapagamot si inay is MORAL, it is still dishonest and illegal. Therefore, not ethical.

    The question is is it ethical, thus, no. But if the question was, was it moral? The answer is a resounding yes.

    1. No, I will not sell the shares to raise the needed funds for my mother’s hospitalization.
      Pursuant to the Securities Regulation Code, this is a case of insider trading. The term actually includes both legal and illegal conduct. The legal version is when corporate insiders—officers, directors, and employees—buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC.
      In this case, if I will sell my shares, I am guilty of misappropriating, and taking advantage of a confidential information which I accidentally acquired from my employer, the issuer.
      Insider trading is unethical as it undermines investor confidence in the fairness and integrity of the securities markets.

      1. legal: insider trading it is, but the evidence is weak against him or there might be no evidence at all

        ethical: unfair to other stockholders because he took advantage of a confidential information, but personally it would be favorable for his suffering loved ones

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