Under federal securities laws, an individual who communicates material nonpublic information to another person who subsequently trades on that information can be held civilly liable as a tipper, even if the communicating individual did not personally execute any trades in the security or receive direct financial compensation.
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Answer
The statement is True. A tipper who improperly discloses material nonpublic information can be held liable for insider trading violations committed by their tippee, regardless of whether the tipper personally executed transactions or received direct financial compensation.
The statement is True because tipper liability under SEC rules applies to anyone who passes material nonpublic information in violation of a duty, rendering them liable for trades executed by the tippee even without direct trading or monetary payment by the tipper.
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Tipper and Tippee Liability Rules