Under federal securities regulations, a corporate insider who intentionally provides material nonpublic information about an upcoming merger to a relative as a gift can be held liable for insider trading as a tipper, even if the insider did not personally execute any securities transactions or receive direct financial compensation.
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The statement is True. A corporate insider who passes material nonpublic information as a gift to a relative satisfies the legal criteria for tipper liability under insider trading regulations, even without personal trading or direct cash payment.
Under federal securities laws, a tipper is liable for insider trading whenever material nonpublic information is improperly disclosed for a personal benefit. Legally, conferring a gift of confidential market-sensitive information to a family member or friend satisfies this personal benefit requirement, even if the tipper never trades or receives money.
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Tipper Liability and the Personal Benefit Standard