A commercial real estate appraiser is retained by a publicly traded retail corporation to value several warehouse distribution centers ahead of an unannounced corporate acquisition. During a social event, the appraiser discloses details of the confidential pending acquisition to a friend, who subsequently purchases call options on the retail corporation's stock prior to the public announcement. Which of the following best describes the regulatory liability under federal securities insider trading rules?
- Both the appraiser and the friend can be held liable for insider trading violations.Cevap
- BOnly the friend can be held liable because the appraiser did not personally execute any securities transactions.
- CNeither party can be held liable because the appraiser is an independent contractor rather than an employee of the retail corporation.
- DOnly the appraiser can be held liable because the friend owes no direct fiduciary duty to the retail corporation's shareholders.
Cevap
Both the real estate appraiser (tipper) and the friend (tippee) can be held liable for insider trading under federal securities laws.
Both the tipper (the real estate appraiser) and the tippee (the friend) can be held liable under federal securities regulations. The appraiser breached a duty of trust and confidence owed to the client company by disclosing material nonpublic information. The friend is liable as a tippee for acting on that information while knowing or having reason to know it was improperly obtained.
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Tipper and Tippee Liability under Insider Trading Regulations