Mebel Doran & Company Case Solution

1. Key Issues

ii. Internal Compliance and SEC Problem

As mentioned in the case that no breach had taken place from the M&A’s end as it was normal practice to consult the Risk Arbitrage Desk. Similarly, associates at Arbitrage Desk were also aware of their responsibility with respect to safeguarding the restricted information; however, it was also regular practice to exchange few hints with associates of other firms, which suggests that there was not any direct breach.

Mr. Hegarty will have to be careful in moving forward as reporting a leak could lead to an inquiry from SEC regarding insider trading, which would result in sanctions a fines worth millions of dollars.

iii. Liability Issue

Though not accepted yet, because of the unsuccessful merger strategy, Mebel, Doran & Company might have to return the US$ 2 million check back to Knox Corporation, in order to not only avoid any legal proceedings but also to keep the relationship going.

iv. Breach of Trust with Knox

Due to the indirect leak, the relationship between Knox Corporation and Mobel, Doran, and Company has suffered a serious hit, which might cause termination of the relationship or a serious to downsize in the future activities.

2. Recommendations

The best way to deal with the above-mentioned issues is to keep them undercover from all stakeholders in a strategic manner. The primary rationale behind this strategy is to avoid deterioration of the relationship with clients, avoid an investigation from SEC over insiders’ trading, and avoid public release of this information leading to reputation damage.

In dealing with a client, Mr. Hegarty can share that another firm was also involved in merging with Power-Tie Corporation and there was no leak from Mobel, Doran and Company’s end. In addition to this, Mr. Hegarty can also offer facilitation for the next merger within the same invoice, in order to ensure long term relationship with Knox Corporation.